UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
___________ TO _____________

Commission file number 0-11871

AMERICAN EXPLORATION COMPANY
(Exact Name of Registrant as Specified in Its Charter)

DELAWARE 74-2086890
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

1331 LAMAR, SUITE 900
HOUSTON, TEXAS 77010
(Address of Principal Executive Offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 756-6000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED

Common Stock, $.05 par value American Stock Exchange

Depositary Shares, each representing a American Stock Exchange
1/200 interest in a share of $450
Cumulative Convertible Preferred Stock,
Series C, par value $1.00 per share

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

As of March 15, 1995, there were outstanding 118,144,275 shares of the
Company's Common Stock. The aggregate market value of the voting stock held by
non-affiliates of the Company was $99,425,380 based on the closing price on
March 15, 1995 as reported on the American Stock Exchange.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement relating to the 1995
Annual Meeting of Stockholders of the Company, which will be filed within 120
days of December 31, 1994, are incorporated by reference into Part III of this
Report.

TABLE OF CONTENTS
PAGE
----
PART I

Item 1. Business .................................................. 1
Item 2. Properties ................................................ 9
Item 3. Legal Proceedings ......................................... 14
Item 4. Submission of Matters to a Vote of Security Holders ....... 14

PART II

Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 15
Item 6. Selected Financial Data..................................... 16
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 17
Item 8. Financial Statements and Supplementary Data................. 23
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................ 23

PART III

Item 10. Directors and Executive Officers of the Registrant.......... 24
Item 11. Executive Compensation...................................... 24
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................. 24
Item 13. Certain Relationships and Related Transactions.............. 24

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 25

PART I
ITEM 1. BUSINESS

GENERAL

American Exploration Company ("American" or the "Company") is an
independent company engaged in oil and gas development, production and
exploration operations. The Company's operating activities are primarily
concentrated in three geographic areas of the United States: the onshore Gulf
Coast region of Texas and Louisiana; the Permian Basin of West Texas; and
offshore in the Gulf of Mexico.

At December 31, 1994, the Company had proved reserves of 40.8 million
barrels of oil equivalent ("MMBOE"), an increase of 75% over proved reserves at
year-end 1993. On a BOE basis, approximately 76% of the Company's proved
reserves at year-end 1994 were natural gas. All equivalent reserve measures
herein are calculated based on a conversion factor of six thousand cubic feet
(Mcf) of gas to one barrel (Bbl) of oil.

American's growth in reserves during the year reflects the replacement of
approximately 540% of 1994 production. Approximately 22.9 MMBOE of proved
reserves were added through acquisition of interests held by investors in a
series of institutional programs managed by American. An additional 2.3 MMBOE of
proved reserves were added through development, recompletions, workovers and
exploration activities, offset by net downward reserve revisions of 3.9 MMBOE
due to lower gas prices and revised estimates of reserves attributable to
several fields.

At December 31, 1994, American had interests in 1,239 net oil and gas
wells and approximately 284,000 net developed acres. Of the Company's total
proved reserves, 62% are located in the ten largest fields based on proved
reserves, of which seven are operated by American. Overall, American operates
fields which represent 71% of total proved reserves. In addition, the Company
had interests in approximately 170,000 net undeveloped acres under domestic
leases and approximately 75,000 miles of domestic seismic data.

American was incorporated in Delaware in 1980. The Company's principal
executive offices are located at 1331 Lamar, Suite 900, Houston, Texas, 77010,
where its telephone number is (713) 756-6000.

AMERICAN'S GROWTH STRATEGY

American's growth strategy is to increase production, reserves and cash
flow primarily through the development and exploitation of existing properties
and the acquisition of properties in the Company's focus areas where American
can utilize its technical and operating capabilities to add value through lower
operating costs per unit of production and the development of additional
reserves. To complement its development, exploitation and acquisition
activities, American's strategy also includes selective participation in
exploration projects. To enhance operating focus, reduce costs per unit of
production and increase profit margins, American also actively sells marginal
and non-strategic properties.

To implement its growth strategy, American's oil and gas operating and
technical group (geologists, geophysicists, production and reservoir engineers
and land personnel) is organized into three geographic teams, each responsible
for one of the Company's primary operating areas. American believes that an
integrated team approach leads to greater efficiency and long-term performance,
particularly in the area of identifying and pursuing new projects.

During 1994, American's primary emphasis was to (1) increase production
and cash flow through development activities on several fields, (2) develop an
inventory of projects with significant reserve potential and (3) to complete the
acquisition and consolidation of reserve interests held by partners in eight
institutional programs managed by the Company.

DEVELOPMENT, EXPLOITATION AND EXPLORATION

The development component of American's strategy involves the drilling of
development wells, recompletions of existing wells into new zones, workovers of
existing wells and facilities work to increase production or reduce costs.
Development projects generally involve low risk activity and relate to enhancing
the value of reserves already classified as proved.

American also has an active exploitation program which includes drilling
projects, workovers and recompletions located primarily in or near oil and gas
fields in the Company's three principal operating areas. Typically, the drilling
projects involve properties in which the Company has an existing lease or
acquires an interest in a lease and with respect to which, in the judgment of
the Company based on its interpretation and evaluation of existing data, the
drilling of a successful well may add significant production and reserves, but
with somewhat greater risk than normal development activities. In identifying
and pursuing such projects, the Company utilizes 3-D seismic data and other
geological and geophysical techniques to reduce the risk of drilling dry holes.
American has also developed expertise in the use of horizontal drilling
technology to enhance reserve recovery from water-drive reservoirs.

During 1994, American drilled 95 gross (33.00 net) development and
exploitation wells, of which 89 gross (31.52 net) were successful. The Company
also performed 70 workovers and recompletions.

During 1994, significant development and exploitation projects were
initiated in the Brazos 440-L block, located offshore in the Gulf of Mexico, the
Sawyer Field in West Texas and the West McAllen Unit in South Texas. At Brazos,
where American has a 46% working interest, development, workovers and
recompletions increased the net production from these blocks to 7.6 MMcf per day
as of year-end 1994 compared to year-end 1993 levels of 1.2 MMcf per day. In
late 1994, American purchased leasehold interests ranging from 50-75% in eight
offshore blocks adjacent to the Company's existing Brazos 440L and 446 blocks.
American plans to participate in an area wide 3-D seismic survey in 1995 which
is expected to lead to further development drilling and the identification of
exploration prospects in and around the Company's leases. In the West McAllen
Field, recompletions of existing wells and the drilling of two development wells
based on 3-D seismic data increased net production from .3 MMcf per day as of
year-end 1993 to approximately 3.2 MMcf per day as of year-end 1994. Since
year-end, one additional development well has been completed. At the Sawyer
Field, which currently represents 27% of American's total proved reserves, 43
development wells and 20 recompletion, workover and facility projects were
completed in 1994. This activity and an increase in working interest ownership
from 12.5% to 56% increased net production from American's leases at the Sawyer
Field from 4.0 MMcf per day at year-end 1993 to 19.8 MMcf per day at year-end
1994. American holds a large inventory of proved undeveloped drilling locations
on its acreage and believes there are a large number of additional potential
in-fill and step-out drilling locations which would be economic at higher gas
prices.

American's exploration strategy is to allocate a relatively small
percentage of its budget to projects where the Company can leverage its
operating experience, leasehold position and seismic database to participate in
projects with significant reserve potential relative to investment. Where
possible, American uses industry partners to reduce risk and leverage returns
through promotes. During 1994, American drilled six gross (1.25 net) exploratory
wells, of which three gross (.14 net) resulted in discoveries.

ACQUISITIONS

Historically, American has been an active acquiror of reserves having made
approximately $930 million in acquisitions between 1983 and 1991, a majority of
which was funded through institutional partnerships. Since 1992, the Company's
acquisition strategy has been to pursue selective acquisitions within the
Company's three domestic operating areas. The Company's approach is to identify
fields in geologically complex areas where it can use 3-D seismic data or
horizontal drilling to attempt to locate, develop and exploit additional
reserves and add value. The Company also seeks acquisitions in fields where it
currently owns an interest to increase its net ownership or gain operating
control. Following this strategy, the Company made six small acquisitions in
1994, including acquiring additional interests of existing fields, for an
aggregate of $3.3 million.

The largest of these acquisitions was the purchase of a 30% working interest in
the Provident City Field, located in Lavaca County, Texas, for $1.6 million.

The most significant acquisition for American during 1994 was the
acquisition of 22.9 MMBOE of proved oil and gas reserves held by investors in a
series of institutional programs (the "APPL Consolidation"), which the Company
managed but held a relatively small percentage, typically 13%. The consideration
paid for the acquisition of the APPL interests was a combination of $31.1
million in cash and 42.7 million shares of the Company's common stock. In
addition to the reserves acquired, American eliminated $13.6 million of
nonrecourse debt in conjunction with the repurchases of notes issued by and net
profits interests in the APPL Programs structured as secured debt financings
(the "APPL Debt Programs"). In early 1995, the Company repurchased the remaining
two investors' interests in the APPL Debt Programs for a combination of $1.3
million in cash and the issuance of 3.4 million shares of the Company's common
stock, thereby eliminating the remaining $6.6 million of nonrecourse debt
outstanding at year-end 1994. The APPL Consolidation, in addition to increasing
proved reserves and production, has provided American with the benefit of
increasing its interest in a number of properties that it currently operates,
thereby providing greater control over development and operating activities and
creating cost efficiencies in terms of production and overhead costs per unit of
production.

In addition to the acquisition of its interests in certain APPL Programs
by American, New York Life Insurance Company ("New York Life"), has agreed to
transfer certain of its APPL Program interests not acquired in the APPL
Consolidation to ANCON Partnership Ltd. ("ANCON"), a partnership formed at the
end of 1993 between the Company and a subsidiary of New York Life. The transfer
of New York Life's APPL Program interests to ANCON is expected to occur in early
1995 with the Company acquiring a 1% interest in such properties at that time.
American has the option to acquire up to an additional 19% interest, which
represents approximately 2.0 MMBOE of proved reserves as of December 31, 1994,
within six months of the transfer.

OTHER CURRENT YEAR DEVELOPMENTS

At the Company's annual meeting held in June 1994, stockholders approved
an increase in the number of authorized shares of common stock from 100,000,000
shares to 200,000,000 shares. The increase in authorized shares allowed the
Company to privately issue 1.5 million shares of common stock in August 1994,
resulting in proceeds of $2.1 million. The proceeds were used to fund various
development projects and provide additional working capital. The increased
authorized shares also enabled American to issue the necessary shares of common
stock required to complete the APPL Consolidation, after obtaining stockholder
approval at a special meeting held in November 1994.

REGULATION

The following discussion of the regulation of the oil and gas industry is
necessarily brief and is not intended to constitute a complete discussion of the
various statutes, rules, regulations or governmental orders to which operations
of the Company may be subject.

FEDERAL REGULATION OF NATURAL GAS. The sale and transportation of natural
gas in interstate commerce are regulated under various federal laws including,
but not limited to, the Natural Gas Act of 1938 ("NGA") and the Natural Gas
Policy Act of 1978 ("NGPA"), both of which are administered by the Federal
Energy Regulatory Commission ("FERC"). Under these acts, producers and marketers
have historically been required to obtain from the FERC certificates to make
so-called "first sales" and abandonment authority to discontinue

such sales. Additionally, first sales have been subject to maximum lawful price
regulation. However, the NGPA provided for phased-in price deregulation of most
new gas production and, as a result of the enactment of the Natural Gas Wellhead
Decontrol Act of 1989, the remaining regulations imposed by the NGA and the NGPA
with respect to first sales, including price controls and certificate and
abandonment authority regulations, were terminated on January 1, 1993. FERC
jurisdiction over transportation and over sales other than first sales has not
been affected.

Commencing in the mid-1980's, the FERC promulgated several orders designed
to make gas markets more competitive by, among other things, inducing or
requiring interstate natural gas pipeline companies to provide transportation
services on an open and nondiscriminatory basis. These orders have had a
profound influence upon natural gas markets in the United States and have, among
other things, fostered the development of a large spot market for gas.

In April 1992, the FERC issued the latest in this series of orders, Order
No. 636. Order No. 636 further restructured the sales and transportation
services provided by interstate pipeline companies. The FERC considered these
changes necessary to improve the competitive structure between interstate
pipelines and other gas merchants, including producers, and to create a
regulatory framework that would put gas sellers into more direct contractual
relations with gas buyers than has historically been the case. Order No. 636 was
implemented on a pipeline-by-pipeline basis through negotiated settlements in
individual pipeline service restructuring proceedings, designed specifically to
"unbundle" those services (e.g., transportation, sales and storage) provided by
many interstate pipelines so that producers of natural gas may secure services
from the most economical source, whether interstate pipelines or other parties.
As a result, in many instances, interstate pipelines are no longer wholesalers
of natural gas, but instead, provide only natural gas storage and transportation
services. In response to numerous requests that the FERC grant a rehearing of
Order No. 636, the FERC issued Order Nos. 636-A and 636-B, which largely
confirmed Order No. 636. Numerous petitions seeking judicial review of these
orders have been filed.

Order No. 636 does not regulate gas producers such as the Company. To
date, management of the Company believes Order No. 636 has not had any
significant impact on the Company as a producer or on the Company's gas
marketing efforts. Because the restructuring process is still continuing through
various pipeline rate proceedings, it is not possible to predict what effect, if
any, the final rule resulting from these orders will have on the Company.

REGULATION OF DRILLING AND PRODUCTION. Exploration and production
operations of the Company are subject to various types of regulation at the
federal, state and local levels. Such regulation includes requiring drilling
permits, requiring the maintenance of bonds in order to drill or operate wells,
and regulating the location of wells, the method of drilling and casing wells,
the surface use and restoration of properties upon which wells are drilled and
the plugging and abandoning of wells. The operations of the Company are also
subject to various conservation regulations, including regulation of the size of
drilling and spacing units or proration units, the density of wells that may be
drilled and the unitization or pooling of oil and gas properties. In this
regard, some states, including states in which the Company operates, allow the
forced pooling or integration of lands and leases. In addition, state
conservation laws establish maximum rates of production from oil and gas wells,
generally prohibit the venting or flaring of gas and impose certain requirements
regarding the ratability of production. The effect of these regulations is to
limit the amount of crude oil and natural gas the Company can produce from its
wells and the number of wells or the locations at which the Company can drill.

FUTURE LEGISLATION AND REGULATION. The Company's business is and will
continue to be affected from time to time in varying degrees by political
developments and federal, state and local laws and regulations. The Company is
not able to predict the terms of any future legislation or regulations that
might ultimately be enacted or the effects of any such legislation or
regulations on the Company.
4

ROYALTY MATTERS

By a letter in May 1993 directed to thousands of producers holding
interests in federal leases, the United States Department of the Interior (the
"Department") announced its interpretation of existing federal leases to require
the payment of royalties on past natural gas contract settlements which were
entered into in the 1980s and 1990s to resolve, among other things, take-or-pay
and minimum take claims by producers against pipelines and other buyers. The
Department's letter set forth various theories of liability, all founded on the
Department's interpretation of the term "gross proceeds" as used in federal
leases and pertinent federal regulations. In an effort to ascertain the amount
of such potential royalties, the Department sent a letter to producers in 1993
requiring producers to provide data on natural gas contract settlements, where
gas produced from federal or Indian leases was involved in the settlement. The
Company received a copy of this information demand letter. In response to the
Department's action, various industry associations and others filed suit seeking
an injunction to prevent the collection of royalties on natural gas contract
settlement amounts under the Department's theories. This case is currently
pending in the United States District Court for the District of Columbia. In
partial response to this lawsuit, the Department has filed various "test" cases
to determine if its theories of liabilities are valid. Because of the pending
lawsuit and because of, among other things, the complex nature of the
calculations necessary to determine potential additional royalty liability under
the Department's theories, it is impossible to predict what, if any, additional
or different royalty obligation the Department may assert with respect to the
Company's prior natural gas contract settlements. The Company cannot therefore
predict what effect, if any, the Department's claims will have on the Company.
Furthermore, certain of the Company's natural gas contract settlements provide
for the buyer to reimburse the Company for any excess or additional payments to
royalty owners required as a result of the Company's receipt of the settlement
amounts.

ENVIRONMENTAL MATTERS

The Company and its operations are subject to a number of federal, state
and local laws and regulations governing the discharge of materials into the
environment or otherwise relating to the protection of the environment. These
environmental provisions may, among other things, impose liabilities for the
cost of pollution clean-up resulting from drilling operations, prohibit drilling
on certain lands and impose restrictions on the injection of liquids into
underground water sources that may, in turn, contaminate groundwater.

The Company has conducted a review of its operations with particular
attention to environmental compliance. The Company believes it has acted as a
prudent operator and is in substantial compliance with environmental laws and
regulations. The Company has and will continue to incur costs in its efforts to
comply with these environmental standards. Although the costs incurred by
American to date solely to comply with environmental laws and regulations have
not had a material adverse effect upon capital expenditures, earnings or the
competitive position of the Company, the trend toward stricter environmental
laws and regulations is expected to have an increasingly significant impact on
the conduct of American's business. The cost of expenditures to comply with
evolving regulations and the related future impact on American's business cannot
be predicted at this time because of the uncertainties regarding future
environmental standards, advances in technology, the timing for expending funds
and the availability of insurance and third-party indemnification. However,
American believes that the evolving environmental standards do not affect the
Company in a materially different manner from other similarly situated companies
in the oil and gas industry.

OIL AND GAS MARKETING

The crude oil and condensate produced from the Company's properties are
generally sold to other companies at field prices posted by the principal
purchasers of crude oil in the areas where such properties are located. As is
customary in the industry, this production is generally sold pursuant to
short-term contracts.
5

The natural gas produced from the Company's properties is generally sold
at the wellhead under contracts which provide for market-sensitive pricing. The
price of natural gas is influenced by many factors including the state of the
economy, weather and competition from other fuels, including oil and coal.
The Company's revenues, cash flows and the value of its gas reserves are all
affected by the level of gas prices.

In the year ended December 31, 1994, sales to Enron Corp. accounted for
approximately 20% of the Company's oil and gas revenues. Management does not
believe that the loss of any single customer would adversely affect the
Company's operations.

OPERATING HAZARDS AND UNINSURED RISKS

The Company's operations are subject to all of the risks normally incident
to the exploration for and the development and production of oil and gas,
including blowouts, cratering, uncontrollable flows of oil, gas or well fluids,
fires, pollution and other environmental risks. These hazards could result in
substantial losses to the Company due to injury and loss of life, severe damage
to and destruction of property and equipment, pollution and other environmental
damage and suspension of operations. Although the Company is not fully insured
against certain of these risks, it maintains insurance coverage considered to be
customary in the industry.

PROGRAM LIABILITY

The Company and certain of its subsidiaries act as general partner of a
variety of limited partnerships. In such capacity, the Company and such
subsidiaries are generally liable for the obligations of the partnerships to the
extent that partnership assets are insufficient to discharge liabilities.
Several of the investment programs formed by the Company or its subsidiaries
require certain levels of insurance to cover operating and other risks inherent
in the production of oil and gas. Under the terms of these programs, the Company
would be liable for any costs or damages incurred by a program resulting from
the Company's failure to carry the required insurance. The Company believes that
its insurance coverage is sufficient as required by the program agreements.

COMPETITION

The oil and gas industry is highly competitive. Major oil and gas
companies, independent producers, drilling and production purchase programs and
individual producers and operators are active competitors for desirable oil and
gas properties. Many competitors have financial resources substantially greater
than those of the Company and staffs and facilities substantially larger than
those of the Company. The availability of a ready market for the oil and gas
production of the Company depends in part on the cost and availability of
alternative fuels, the level of consumer demand, the extent of other domestic
production of oil and gas, the extent of imports of foreign oil and gas, the
cost of and proximity to pipelines and other transportation facilities,
regulations by state and federal authorities and the cost of complying with
applicable environmental regulations.

EMPLOYEES

At March 1, 1995, American had 202 employees.

FOREIGN AND DOMESTIC OPERATIONS

The Company's only industry segment is oil and gas exploration and
production. Certain information concerning the Company's operations by
geographic area is set forth in Note 15 to the Consolidated Financial Statements
in Item 8, which information is incorporated herein by reference.

EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below are the names, ages and positions of the executive
officers of the Company. All executive officers are elected for a term of one
year and serve until their successors are elected and have qualified.

NAME OFFICE AGE
---- ------ ---
Mark Andrews Chairman of the Board and 44
Chief Executive Officer

John M. Hogan Senior Vice President and Chief Financial Officer 50

Harold M. Korell Senior Vice President - Operations 50

Harry C. Harper Vice President - Land 56

Robert R. McBride, Jr. Vice President - Production Operations 39

Steven L. Mueller Vice President - Exploitation 42

T. Frank Murphy Vice President - Corporate Finance and Secretary 40

Elliott Pew Vice President - Exploration 40

MARK ANDREWS, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, founded
the Company in 1980. Mr. Andrews is also a director of IVAX Corporation.

JOHN M. HOGAN, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, who
previously was Senior Vice President - Finance of the Company during 1985 and
1986, rejoined the Company in August 1992. From 1987 until 1992, Mr. Hogan
operated a CPA firm that provided tax, accounting, and management services. He
was Vice President and Chief Financial Officer of Ensource, Inc. from 1986 to
1987.

HAROLD M. KORELL, SENIOR VICE PRESIDENT - OPERATIONS, joined the Company
in June 1992. He was Executive Vice President of McCormick Resources, a private
independent oil and gas company, from 1989 until 1992. From 1973 to 1989, Mr.
Korell was with Tenneco Oil Company where he served in various positions and
eventually as Vice President and Manager of Production.

HARRY C. HARPER, VICE PRESIDENT - LAND, joined the Company in 1990 when
it acquired Hershey. He had been Senior Vice President, Secretary and General
Counsel of Hershey since 1973.

ROBERT R. MCBRIDE, JR., VICE PRESIDENT - PRODUCTION OPERATIONS, joined
the Company in August 1992. From 1988 to 1992, he served in various capacities
with British Gas plc, most recently as Exploitation Manager. From 1977 to 1988,
he held various production and management positions with Tenneco Oil Company.

STEVEN L. MUELLER, VICE PRESIDENT - EXPLOITATION, joined the Company in
November 1992. From 1988 to 1992, he was Exploration Manager - South Louisiana
Division at FINA, Inc. Prior to that, he served in a variety of positions at
Tenneco Oil Company.

T. FRANK MURPHY, VICE PRESIDENT - CORPORATE FINANCE AND SECRETARY, joined
the Company in 1989. He served in a variety of financial positions until
December 1991 when he was appointed Vice President - Investor Relations. He was
appointed Vice President - Corporate Finance in March 1993 and was appointed
Secretary in October 1993. Mr. Murphy was employed by LCS/Gemisys, a computer
software and services company, from 1983 to 1989, initially as a regional
manager and then as Vice President - Northeast Region.

ELLIOTT PEW, VICE PRESIDENT - EXPLORATION, joined the Company in October
1992 as a senior geophysicist. He was appointed Vice President - Exploration in
July 1993. From 1989 to 1992, he was employed by FINA, Inc. as a division
geologist and then as Exploration Manager - South Texas Division.

ITEM 2. PROPERTIES

The Company's producing properties are located principally in three
geographic areas of the United States: the onshore Gulf Coast region, primarily
in Texas and Louisiana; the Permian Basin of West Texas; and offshore in the
Gulf of Mexico.

MAJOR PROPERTIES

Set forth below is information concerning each of the Company's four
largest fields based on the discounted present value of the estimated pre-tax
future net cash flows of $142.1 million at December 31, 1994.

AS OF DECEMBER 31, 1994
----------------------------------------------------------------------------------
Percent of
Percent of Percent of Present Value
PROVED RESERVES RESERVES Estimated of Estimated
Oil Gas Future Net Future Net
(MBBLS) (MMCF) OIL GAS CASH FLOWS CASH FLOWS
------- ------- ----- ----- ---------- -------------

Sawyer Field .............................. 49 65,205 .5% 34.9% 20.4% 20.9%
Bowdoin Field ............................. -- 13,438 -- 7.2 20.6 11.6
Henderson Canyon Area ..................... 64 12,629 .7 6.8 5.3 5.9
Bradshaw Field ............................ -- 28,215 -- 15.1 4.5 4.3
Other fields .............................. 9,547 67,193 98.8 36.0 49.2 57.3
------ ------- ----- ----- ----- -----
Total ................................... 9,660 186,680 100.0% 100.0% 100.0% 100.0%
====== ======= ===== ===== ===== =====

DESCRIPTION OF FIELDS

SAWYER FIELD. The Sawyer Field is located in Edwards, Sutton and
Schleicher Counties, Texas. The producing trend that encompasses the field
covers approximately 400 square miles. The Company owns interests in 696 gas
wells in the field with an average net working interest of 56%, up from 12.5% in
1993 as a result of the APPL Consolidation. The main producing formation in the
field is the Canyon Sandstone, which is comprised of a series of stacked sands
separated by intervals of shale. Gas and condensate are produced from depths
ranging from 2,500 to 7,000 feet. The low permeability or "tight" character of
the Canyon Sandstone necessitates fracture stimulation of the reservoir when new
wells are drilled. In 1994, the Company completed 43 development wells with a
combined initial gross production rate of 19.3 MMcf per day (9.5 MMcf net to the
Company). Due to weak gas prices in late 1994 and early 1995 and a reduced
capital budget for 1995, American has deferred further development activity in
the Sawyer Field for 1995, except for the drilling of twelve development wells,
of which seven were in progress at year-end 1994.

The gas that American produces from the Sawyer Field is dedicated under a
long-term market sensitive contract through August 2003 to Natural Gas Marketing
and Storage Company, a subsidiary of Enron Corp. Gas produced from all wells
drilled after August 1993 is subject to a price floor of $1.85 per million
British Thermal Unit ("MMBtu") unless the buyer determines that the floor price
is uneconomical and elects not to purchase such gas. The contract also permits
American to sell excess or released gas to third parties under certain
conditions.

BOWDOIN FIELD. The Bowdoin Field, located in Phillips and Valley
Counties, Montana, was discovered in 1913. The field produces gas from
lenticular and shale sandstones at a depth of approximately 1,500 feet. The
reserves being produced from this field are expected to be relatively long-lived
and, due to the shallow nature of the wells, production and operating costs are
relatively low. The Company owns an average net working interest of
approximately 14%, up from 8% in 1993 due to the APPL Consolidation, in 534
wells.

Gas produced from the Bowdoin Field is sold under a life of lease
contract to KN Energy, Inc. Pursuant to a 1992 settlement agreement, KN Energy
prepaid the Company approximately $2.0 million, which was used to repay a
long-term production payment that burdened the field and is currently being
recouped without interest by KN Energy out of ongoing gas purchases. American
realized an average of $3.25 per Mcf for gas produced from this field during
1994. In February 1995, the Company was served with a lawsuit requesting a
reduction of the contract price to market levels. See Note 13 to the
Consolidated Financial Statements in Item 8.

HENDERSON CANYON AREA. The Henderson Canyon Area includes the Henderson
Canyon and Angus fields, which are located in Crockett County, Texas. In early
1993, American sold approximately 40% of its interest in the Henderson Canyon
Field to several of the Company's NYLOG Programs. American is the operator of 72
wells in these fields with an average net working interest of 32%. Gas produced
from these fields is sold at market-sensitive prices. Six development wells were
drilled in 1994, with a combined initial gross production rate of 5.0 MMcf per
day (1.5 MMcf net to the Company). The Company has currently suspended drilling
in the Henderson Canyon Area for 1995 because of low gas prices.

BRADSHAW FIELD. The Bradshaw Field encompasses over 250 square miles and
is located on the western edge of the Hugoton Field in southwestern Kansas. The
Company owns interests in 140 gas wells. As a result of the APPL Consolidation,
the Company's average net working interest in these wells has increased to 77%
compared to 25.7% in 1993. Net production in December 1994 averaged 9.1 MMcf of
gas per day. Since assuming operations, the Company has increased daily
production to the point that the field is producing near the capacity of the
gathering and compression system.

TITLE TO PROPERTIES

The Company's properties are subject to customary royalty interests,
liens incident to operating agreements, liens for current taxes and other
burdens, including other mineral encumbrances and restrictions. The Company does
not believe that any of these burdens materially interfere with the use of such
properties in the operation of its business. In addition, substantially all of
the properties in which the Company or its subsidiaries own a direct interest
are subject to mortgages granted to secure credit facilities.

A thorough examination of title has been performed with respect to
substantially all of the Company's producing properties, and the Company
believes that it generally holds satisfactory title to such properties. As is
customary in the oil and gas industry, little or no investigation of title is
made at the time of acquisition of undeveloped properties (other than a
preliminary review of local minerals records). Investigations of title are
generally made before commencement of drilling operations and, in most cases,
include the receipt of a title opinion of local counsel.

RESERVES

Although the Company prepares an annual estimate of proved oil and gas
reserves, no estimate of total proved net oil and gas reserves of the Company
has been filed with or included in reports to any federal authority or agency,
other than estimates previously filed with the Securities and Exchange
Commission. The Company is not aware of any major discovery or the occurrence of
any other favorable or adverse event since December 31, 1994 that would cause
material changes in the quantities of proved reserves owned by the Company as of
such date. The information in this section should be read in conjunction with
the Consolidated Financial Statements of the Company, including the Notes
thereto, set forth in a separate section of this Report on Form 10-K.

The tables below set forth certain information concerning the proved oil
and gas reserves owned by the Company at December 31, 1994. The information
contained in the tables is based upon estimates of the proved oil and gas
reserves of the Company and the rates of production therefrom. The estimated
future net cash flows before income taxes of proved reserves were estimated on
the basis of year-end prices, except in those instances where fixed and
determinable gas price escalations are covered by contracts. The prices used
averaged $15.13 per Bbl of oil and $1.69 per Mcf of gas at December 31, 1994.

There are numerous uncertainties inherent in estimating quantities of
proved oil and gas reserves and in projecting future rates of production and
future net cash flows. The quantities of oil and gas that are ultimately
recovered, production and operating costs, the amount and timing of future
development expenditures and future oil and gas sales prices may all differ from
those assumed in these estimates. Reserve assessment is a subjective process of
estimating recovery from underground accumulations of oil and gas that cannot be
measured precisely, and estimates of other persons might differ from those of
the Company. Accordingly, reserve estimates are often different from the
quantities of oil and gas that are ultimately recovered, which differences may
be significant. Moreover, the discounted present value shown below should not be
construed as the current market value of the estimated oil and gas reserves
attributable to the Company's properties. A market value determination would
take into account additional factors including, but not limited to, the recovery
of reserves not presently classified as proved, anticipated future changes in
prices and costs and a discount factor more representative of the time value of
money and the risks inherent in reserve estimates.

The Company's estimated proved oil and gas reserves at December 31, 1994
are as follows:

Oil Gas
Reserves Reserves
(MBBLS) (MMCF)
----- -------
Proved developed.............. 8,697 127,838
Proved undeveloped............ 963 58,842
----- -------
Total proved ............... 9,660 186,680
===== =======

The Company's estimated future net cash flows from proved and proved
developed oil and gas reserves at December 31, 1994, and the discounted present
value of such cash flows (before income taxes) are as follows (in thousands):

Proved
PROVED DEVELOPED
------- ---------
1995 (a)...................... $22,445 $34,942
1996 (a)...................... 26,511 27,049
1997.......................... 26,781 21,026
Remainder..................... 168,541 112,340
------- -------
Total future net cash flows. $244,278 $195,357

Present value before income
taxes (discounted at 10%) .. $142,080 $122,328
======== ========

(a) For 1995 and 1996, estimated pre-tax future net cash flows from
proved reserves are projected to be lower than estimated pre-tax
future net cash flows from proved developed reserves due to capital
expenditures associated with proved undeveloped reserves during 1995
and 1996 of approximately $17.2 million and $12.6 million,
respectively, which are primarily for new development wells.

DRILLING

The following table sets forth the results of drilling activity by the
Company for the last three years.

YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1994 1993 1992
------ ----------------------------------- ------------------------------------
OTHER OTHER
U.S. U.S. CANADA FOREIGN TOTAL U.S. CANADA FOREIGN TOTAL
----- ----- ------ ------- ----- ---- ------ ------- -----
<F1>

DEVELOPMENT WELLS
Gross:
Productive ........................... 89 77 3 - 80 80 1 - 81
Dry Holes ............................ 6 5 3 - 8 13 - - 13
----- ----- ---- ---- ----- ---- ---- ---- -----
Total ............................... 95 82 6 - 88 93 1 - 94
===== ===== ==== ==== ===== ==== ==== ==== =====
Net:
Productive ........................... 31.52 10.17 1.44 - 11.61 8.73 0.33 - 9.06
Dry Holes ............................ 1.48 0.42 1.75 - 2.17 1.04 - - 1.04
----- ----- ---- ---- ----- ---- ---- ---- -----
Total ................................ 33.00 10.59 3.19 - 13.78 9.77 0.33 - 10.10
===== ===== ==== ==== ===== ==== ==== ==== =====
EXPLORATORY WELLS
Gross:
Productive ........................... 3 2 - - 2 2 - - 2
Dry Holes ............................ 3 4 - 2 6 10 1 1 12
----- ----- ---- ---- ----- ---- ---- ---- -----
Total ............................... 6 6 - 2 8 12 1 1 14
===== ===== ==== ==== ===== ==== ==== ==== =====
Net:
Productive ........................... 0.14 0.28 - - 0.28 0.91 - - 0.91
Dry Holes ............................ 1.11 1.02 - 0.70 1.72 4.31 0.12 0.40 4.83
----- ----- ---- ---- ----- ---- ---- ---- -----
Total ............................... 1.25 1.30 - 0.70 2.00 5.22 0.12 0.40 5.74
===== ===== ==== ==== ===== ==== ==== ==== =====
<FN>
<F1>As of December 31, 1994, the Company was also drilling twelve (4.11 net)
development wells.
</FN>

PRODUCTION

The following table summarizes the average prices received with respect
to oil and gas produced and sold from, the net volumes of oil and gas produced
and sold from and certain additional information relating to, all properties in
which the Company held an interest during the last three years.

YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
1994 1993 1992
------- --------------------------------- ---------------------------------
U.S. U.S. CANADA TOTAL U.S. CANADA TOTAL
------- ------- ------- ------- ------- ------- -------
<F1>

AVERAGE SALES PRICE:
Gas ($/Mcf) ........................... $ 1.90 $ 2.13 $ 1.23 $ 1.92 $ 1.88 $ 1.01 $ 1.59
Oil ($/Bbl) ........................... 15.39 16.20 12.79 16.01 18.81 13.46 18.16
BOE ($/Bbl) ........................... 12.67 14.05 7.94 12.99 14.06 7.14 12.23

PRODUCTION DATA:
Gas (MMcf) ............................ 16,241 11,794 3,542 15,336 13,279 6,526 19,805
Oil (MBbls) ........................... 1,241 1,189 72 1,261 1,307 181 1,488
MBOE .................................. 3,948 3,155 662 3,817 3,520 1,269 4,789

ADDITIONAL $/BOE DISCLOSURES:
Production and
operating costs<F2> ................. $ 5.40 $ 4.47 $ 2.89 $ 4.19 $ 4.42 $ 3.03 $ 4.05
Production and
severance taxes ..................... 0.72 0.77 0.06 0.64 0.81 0.05 0.61
Depreciation, depletion and
amortization ........................ 7.50 6.89 2.85 6.19 7.13 4.00 6.30
<FN>
<F1>The Company sold its Canadian properties in mid-1993.

<F2>The amounts for 1993 and 1992 reflect reclassifications of the Company's
share of producing overhead well costs from general and administrative
expense to production and operating costs. These reclassifications conform
with current classifications.
</FN>

PRODUCTIVE WELLS

The following table sets forth information regarding the number of
productive wells in which the Company held a working interest at December 31,
1994. Productive wells are either producing wells or wells capable of production
although currently shut-in. One or more completions in the same well bore are
counted as one well.

GROSS NET
----- -----
United States:
Oil......................... 3,115 476
Gas......................... 2,805 763
----- -----
Total..................... 5,920 1,239
===== =====

ACREAGE

The following table sets forth the approximate developed and undeveloped
acreage in which the Company held a leasehold, mineral or other interest at
December 31, 1994.

Undeveloped acreage includes leased acres on which wells have not been
drilled or completed to a point that would permit the production of commercial
quantities of oil and gas, regardless of whether or not such acreage contains
proved reserves. A gross acre is an acre in which an interest is owned. A net
acre is deemed to exist when the sum of fractional ownership interests in gross
acres equals one. The number of net acres is the sum of the fractional interests
owned in gross acres expressed as whole numbers and fractions thereof. Included
in the following table are 311,806 gross (14,148 net) U.S. developed mineral
acres and 811,446 gross (89,994 net) U.S. undeveloped mineral acres. A mineral
acre is an acre in which the Company has a perpetual interest as contrasted to a
leased acre in which the Company's interest is typically limited to the life of
production or otherwise limited in time.

DEVELOPED UNDEVELOPED
--------------------- ---------------------
GROSS NET GROSS NET
--------- ------- --------- -------
United States:
Arkansas ..................... 11,244 2,703 25,099 2,443
Kansas ....................... 157,824 64,948 23,481 5,219
Louisiana .................... 19,584 2,413 3,223 514
Mississippi .................. 26,855 5,044 179,785 43,545
Montana ...................... 257,199 35,045 147,317 42,539
New Mexico ................... 16,967 3,331 6,905 620
North Dakota ................. 21,905 2,347 7,523 1,122
Oklahoma ..................... 159,375 26,830 111,830 12,159
Texas ........................ 471,084 116,394 431,175 34,279
Utah ......................... 5,002 1,808 21,160 6,112
Wyoming ...................... 11,470 2,831 15,446 3,459
Eleven other states .......... 18,985 6,449 60,648 8,754
Gulf of Mexico ............... 61,450 13,819 15,220 8,733
--------- --------- --------- ---------
Total United States ............ 1,238,944 283,962 1,048,812 169,498
--------- --------- --------- ---------
International:
Canada (a) ................... 22,240 112 149,055 658
New Zealand (a) .............. -- -- 725,992 32,307
--------- --------- --------- ---------
Total International ............ 22,240 112 875,047 32,965
--------- --------- --------- ---------
Total .......................... 1,261,184 284,074 1,923,859 202,463
========= ========= ========= =========

(a) Acreage relates to overriding royalty interest.

ITEM 3. LEGAL PROCEEDINGS

Information regarding legal proceedings of the Company is set forth in Note
13 to the Consolidated Financial Statements in Item 8, which information is
incorporated herein by reference.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.
14

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's common stock trades on the American Stock Exchange under the
symbol "AX". At March 1, 1995, the Company had 5,272 stockholders of record.

The following table sets forth the high and low sales prices for the
quarters indicated.

PRICE RANGE OF COMMON STOCK

HIGH LOW
-------- --------
YEAR ENDED DECEMBER 31, 1994
First Quarter ............................ $1 7/8 $1 3/8
Second Quarter ........................... 1 1/2 1 1/8
Third Quarter ............................ 1 1/2 1 13/16
Fourth Quarter ........................... 1 3/8 7/8

YEAR ENDED DECEMBER 31, 1993
First Quarter ............................ $1 3/4 $1 1/8
Second Quarter ........................... 1 1/2 1
Third Quarter ............................ 1 11/16 1 1/4
Fourth Quarter ........................... 1 5/8 1 1/8

The Company has not paid any dividends on its common stock and does not
expect to pay dividends on its common stock for the foreseeable future. Payment
of dividends on the Company's common stock is also currently prohibited by the
terms of various agreements relating to outstanding indebtedness of the Company.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected financial data for the Company as
of and for each of the years in the five-year period ended December 31, 1994.
The financial data was derived from the consolidated financial statements of the
Company and should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Consolidated
Financial Statements and related Notes thereto included elsewhere herein.

YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
(In thousands, except for per share amounts) 1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------

SUMMARY OF OPERATIONS DATA:
Oil and gas sales ................................................. $ 50,033 $ 49,589 $ 58,560 $ 71,499 $ 51,130
Total revenues .................................................... 51,359 58,158 60,008 70,041 61,862
Costs and expenses ................................................ 102,792 70,176 119,687 83,379 48,302
Income (loss) from operations ..................................... (51,433) (12,018) (59,679) (13,338) 13,560
Income (loss) before extraordinary item ........................... (60,235) (19,186) (68,899) (24,257) 2,822
Net income (loss) ................................................. (54,816) (19,186) (65,799) (24,257) 4,049
Net income (loss) to common stock ................................. (56,616) (19,261) (65,799) (24,371) 3,498

Net income (loss) per common share:
Primary and fully diluted:
Income (loss) before extraordinary item ....................... $ (.77) $ (.28) $ (1.07) $ (.45) $ .07
Net income (loss) ............................................. (.70) (.28) (1.02) (.45) .11
Cash dividends declared per common share .......................... -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
SUMMARY OF CASH FLOW DATA:
Net cash provided by operating activities ......................... $ 7,747 $ 24,717 $ 14,237 $ 21,505 $ 25,161
Conveyance of oil and gas properties held for resale .............. -- -- 936 6,449 117,072
Total capital expenditures ........................................ 49,889 24,167 22,516 63,636 33,067
Bank debt borrowings (repayments), net ............................ 21,500 (47,500) (20,000) 32,000 26,494
Bridge credit facility borrowings (repayments), net ............... 31,128 -- -- (4,273) (135,291)
Other debt repayments, net ........................................ 8,622 4,001 10,808 4,107 7,092
Issuance of 11% senior subordinated notes ......................... -- -- 10,000 25,000 --
Repayment of 9 1/2% debentures .................................... -- -- -- 33,488 --
Issuance of securities ............................................ 2,100 21,348 28,096 -- 35
-----------------------------------------------------------------------------------------------------------------------------------
SUMMARY OF BALANCE SHEET DATA:
Current assets .................................................... $ 26,127 $ 22,229 $ 51,179 $ 35,025 $ 40,795
Current liabilities ............................................... 30,229 32,352 48,457 62,091 40,899
Property, plant and equipment, net ................................ 195,405 160,885 201,915 298,896 174,404
Total assets ...................................................... 223,894 185,598 256,820 336,803 220,453
Long-term obligations and convertible redeemable
preferred stock, excluding current obligations .................. 100,840 62,848 115,256 135,226 79,675
Total stockholders' equity ........................................ 87,710 86,406 85,160 127,433 91,937
-----------------------------------------------------------------------------------------------------------------------------------

American has made several significant acquisitions and dispositions of
oil and gas properties and companies during the periods presented in the table
above. The Company acquired Hershey in August 1990 and Conquest in February
1991. American sold approximately 40% of its interest in the Henderson Canyon
Field in March 1993 and sold its Canadian assets in mid-1993. The Company
purchased investors' interests in the APPL Programs in 1994 and early 1995.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

The following table sets forth certain operating information of the
Company for the periods presented. See Item 2. in Part I for a breakout of
production and prices between U.S. and Canadian operations.

YEAR ENDED DECEMBER 31,
---------------------------
1994 1993 1992
------- ------- -------
AVERAGE SALES PRICE:
Gas ($/Mcf) .................................... $ 1.90 $ 1.92 $ 1.59
Oil ($/Bbl) .................................... 15.39 16.01 18.16
BOE ($/Bbl) .................................... 12.67 12.99 12.23

PRODUCTION DATA:
Gas (MMcf) ..................................... 16,241 15,336 19,805
Oil (MBbls) .................................... 1,241 1,261 1,488
MBOE ........................................... 3,948 3,817 4,789

ADDITIONAL $/BOE DISCLOSURES:
Production and operating costs ................. $ 5.40 $ 4.19 $ 4.05
Production and severance taxes ................. 0.72 0.64 0.61
Depreciation, depletion and amortization ....... 7.50 6.19 6.30

1994 COMPARED TO 1993

REVENUES. Oil and gas sales in 1994 totaled $50.0 million compared to
$49.6 million in 1993. The increase in sales was due to higher domestic oil and
gas production offset in part by declines in prices and the sales of the
Company's Canadian oil and gas properties in mid-1993. On a net basis, gas
production increased 6% while oil production decreased 2%, resulting in a net
increase to sales of $1.4 million. Excluding the production from the Canadian
properties that were sold, gas production increased 29% and oil production
increased 4%. The increase in gas production was the result of new development
wells drilled, workovers and recompletions of existing wells in the first half
of the year and the acquisition of investors' interests in the APPL Programs
(see "Capital Resources and Liquidity" for discussion), which occurred primarily
during the third and fourth quarters of 1994. These increases more than offset
the loss of production from the sales of the Company's Canadian assets in
mid-1993. As a result of American's 1994 development and acquisition activity,
the Company's gas production has increased to a current average daily level of
approximately 73.8 MMcf, up 134% over the average daily gas production rate at
the end of 1993. For 1994, American's average realized gas price and oil price
were down 1% and 4%, respectively, from 1993, decreasing sales by $1.0 million.
As a result of the Company hedging a portion of its gas and oil production
during 1994, gas sales increased by $1.6 million and oil revenues were reduced
by $44,000.

The Company recorded gas settlement income of $374,000 in 1994 and $15.6
million in 1993. The 1993 income included amounts received in connection with
the settlement of certain litigation with Louisiana Intrastate Gas Corporation
("LIG") and for the renegotiation of American's contract to sell gas from the
Thomasville Field.

The Company recognized a gain on sales of oil and gas properties of $1.1
million in 1994 compared to a loss on sales of oil and gas properties of $6.9
million in 1993. In mid-1993, the Company sold its Canadian assets resulting in
losses totaling $5.8 million, including $1.8 million for the elimination of the
foreign currency translation adjustment balance. The gain for 1994 and the
remaining loss for 1993 resulted from the divestiture of minor properties.

COSTS AND EXPENSES. Production and operating expenses were up 33% to $21.3
million in 1994. On a BOE basis, operating costs increased 29% to $5.40 in 1994
compared to $4.19 in 1993. These increases reflect higher U.S. operating costs
which more than offset the decreases associated with the sales of the Company's
Canadian properties in mid-1993. Higher domestic operating expenses are related
to workovers at the Brazos blocks offshore and the Sawyer Field totaling $1.1
million. In addition, American has recorded site remediation costs of $2.4
million in 1994 and anticipates it will incur additional costs from time to time
related to continued assessment, testing, disposal, site restoration and other
activities in connection with the Company's environmental proceedings. Also,
American's operating costs were increased by $3.8 million during the second half
of 1994 due to the acquisition of interests pursuant to the APPL Consolidation.

Depreciation, depletion and amortization ("DD&A"), which totaled $29.6
million in 1994, rose 25% from the prior year due to an increase in the
Company's DD&A per BOE rate and an increase in gas production. Downward reserve
revisions at year-end 1993, including reserve revisions related to low oil
prices at year-end 1993, resulted in a DD&A per BOE rate of $7.50 in 1994
compared to $6.19 in 1993. The higher 1994 rate is also due to the fact that the
Canadian properties sold in mid-1993 had a lower depletion rate than the average
rate for the Company's other properties.

General and administrative expense ("G&A") totaled $10.0 million in 1994,
or 35% above 1993 expense of $7.4 million. The higher G&A expense for 1994
primarily relates to the loss of management and technical fee reimbursements as
a result of the APPL Consolidation with no significant reductions in G&A expense
in 1994. As a result of planned reductions related to the APPL Consolidation,
the Company recorded a $2.0 million severance charge in 1994. These increases
were partially offset by a decrease in salaries and benefits associated with the
reductions in American's work staff in early 1994 and the elimination of
Canadian G&A expense.

Taxes other than income were $1.1 million higher in 1994 compared to 1993.
This increase was due primarily to higher production taxes related to increased
domestic oil and gas sales and higher ad valorem taxes related to an increase in
the Company's oil and gas property base due to the APPL Consolidation.

Exploration expense decreased 66% to $2.6 million in 1994. The decrease in
exploration expense reflects steps taken over the past year by American to
eliminate its international exploration commitments and to emphasize domestic
development and exploitation projects in 1994.

Effective December 31, 1994, the Company elected to change its accounting
policy related to proved oil and gas properties to a policy that is consistent
with the provisions of the Financial Accounting Standards Board exposure draft,
"Accounting for the Impairment of Long-Lived Assets". Under the Company's new
policy, if the book value of an individual proved field is greater than its
undiscounted future net cash flow from proved reserves, then an impairment is
recognized for the difference between the net book value and the fair value.
Management's initiative to change its policy was prompted by the considerable
volatility of oil and gas prices during the past several years, the resulting
economic losses of proved reserves and corresponding increases in the Company's
DD&A rate. This change in accounting policy resulted in an approximate $25.0
million noncash impairment charge for 1994 against the book value of certain of
American's proved oil and gas properties. Reference is hereby made to Note 2 to
the Consolidated Financial Statements in Item 8.

Impairment expense for 1994 also includes a $6.4 million noncash charge
for the write-off of the Company's remaining leasehold interest in Tunisia.
American sold its interest in exchange for the purchaser assuming its remaining
Tunisian commitment. The remaining impairment expense for 1994 primarily
represents the write-off of several domestic prospects on which the Company does
not plan to conduct any further exploratory activity. The impairment charge for
1993 includes $10.2 million associated with the write-offs of the Company's
leasehold interest in Oman and a portion of the leasehold interest in Tunisia.

Interest expense decreased 3% in 1994 to $6.6 million due primarily to a
lower average bank debt balance during 1994 and the elimination of $14.1 million
of debt in connection with the Canadian asset sales in mid-1993 offset in part
by a decrease in capitalized interest. Capitalized interest was $1.5 million in
1994 compared to $2.3 million in 1993. The decrease in capitalized interest was
due to a reduction in unproved properties on which interest is capitalized.
Other expense for 1994 and 1993 includes $2.8 million and $739,000,
respectively, of fees incurred by American in conjunction with the Company's
debt instruments. These costs were higher for 1994 due to $2.1 million of fees
paid by American in connection with the new bank credit agreement and the bridge
facility extended to the Company by New York Life for the APPL Consolidation.

EXTRAORDINARY ITEM. The $5.4 million extraordinary gain recorded in 1994
resulted from the elimination of nonrecourse debt in conjunction with the
repurchases of notes issued by and net profits interests in the APPL Debt
Programs. These repurchases were part of the APPL Consolidation. This gain
represents the difference between the outstanding note balances and the actual
purchase price of the notes.

NET LOSS. American experienced a net loss of $54.8 million, or $.70 per
share, in 1994 compared to a net loss of $19.2 million, or $.28 per share, in
1993. The higher net loss for 1994 was primarily due to the impact of the
impairment of proved properties, an increase in operating costs and expenses on
a per unit of production basis and the gas settlements in 1993 offset in part by
lower exploration expense, the extraordinary gain resulting from the APPL
Consolidation and the loss on sales of oil and gas properties recognized in 1993
related to the sales of the Company's Canadian assets.

There can be no assurance that the Company will not continue to record
losses in the future. Based on current prices and operating environment, the
Company expects to record a net loss in 1995.

1993 COMPARED TO 1992

REVENUES. American's revenues were $58.2 million in 1993 compared to $60.0
million in 1992. Oil and gas sales declined $9.0 million to $49.6 million in
1993. The decline in sales was due to a 20% decrease in production and lower oil
prices offset in part by a rise in gas prices. Lower production volumes were
primarily due to the loss of production from properties sold during 1993,
including the sale of approximately 40% of the Company's interest in the
Henderson Canyon Field and the sales of the Company's Canadian assets. The net
effect of the changes in prices was an increase to sales of $2.3 million.
However, gas revenues were reduced by $597,000 for the net cost of certain gas
hedges. The Company did not enter into any hedges in 1992. Gas settlement income
contributed $15.6 million to revenues in 1993 compared to $1.8 million in 1992.
The 1993 income resulted primarily from a litigation settlement with LIG and the
renegotiation of American's gas contract for the Thomasville Field. As a result
of the sales of the Company's Canadian assets in mid-1993, the Company
recognized losses totaling $5.8 million, including $1.8 million for the
elimination of the foreign currency translation adjustment balance. The
remaining loss on sales of oil and gas properties for 1993 and the loss for 1992
resulted from the divestiture of minor properties.

COSTS AND EXPENSES. Operating expenses decreased from 1993 to 1992,
primarily reflecting declines in production. Production and operating costs were
down 18% to $16.0 million. However, on a BOE basis, the Company's rate increased
3% to $4.19 in 1993 compared to $4.05 in 1992 due primarily to the sales of the
Canadian properties which operated at a lower cost. In 1993, DD&A expense
decreased 22% to $23.6 million from the prior year and the DD&A per BOE rate
dropped to $6.19 compared to $6.30 in 1992. In addition to lower production
volumes, the declines in 1993 DD&A reflect a smaller oil and gas property base
due to property sales offset in part by a $600,000 adjustment for downward
reserve revisions caused by low year-end oil prices and the renegotiated
Thomasville Field gas contract. DD&A expense for 1992 included a $1.6 million
adjustment to fully deplete a portion of a field that was plugged and abandoned.
Also, taxes other than income were $1.0 million lower in 1993 compared to 1992.

G&A expense was down 33% in 1993 from the amount incurred in 1992. This
decrease reflects staff reductions in early 1993 and the completion of the
consolidation of American's New York and California operations into its Houston
office. The 1993 G&A amount included $1.0 million for severance costs related

to further work staff reductions in early 1994 due to decreased exploration
activities and ongoing efforts to reduce overhead.

Exploration expense for 1993 was comparable to the prior year. In late
1992, the Company initiated a strategy to reduce exploratory drilling which
resulted in lower operating costs in 1993. However, this decline was offset by
charges totaling $2.6 million associated with prior international drilling
commitments.

During 1993, the Company recorded $11.0 million of impairment expense,
which included $10.2 million for the write-offs of the Company's leasehold
interest in Oman and a portion of the leasehold interest in Tunisia. In 1992,
American recorded an impairment charge of $39.3 million for the write-downs of
the Company's Canadian foothill properties and approximately 40% of the
Company's interest in the Henderson Canyon Field since American had begun
negotiations to sell these properties in late 1992. The remaining impairment
charge for 1992 was due primarily to the write-off of the nonproducing leases in
the Gulf of Mexico which were acquired in the Conquest acquisition.

Interest expense declined 28% in 1993 to $6.8 million due to lower debt
levels. Capitalized interest was down $1.0 million from 1992 to 1993 as a result
of a reduction in unproved properties on which interest is capitalized. Other
expense includes bank fees totaling $739,000 in 1993 compared to $1.3 million in
1992.

EXTRAORDINARY ITEM. The $3.1 million extraordinary gain recorded in 1992
resulted from the restructuring of nonrecourse debt of one of the Company's
wholly owned subsidiaries associated with the APPL Debt Programs. The gain
represented the difference between the reduction in debt and the value of the
net profits interests conveyed to the lenders, net of transaction costs.

NET LOSS. American recorded a net loss of $19.2 million, or $.28 per
share, in 1993 compared to a net loss of $65.8 million, or $1.02 per share, in
1992. The lower net loss for 1993 was primarily due to higher gas prices, gas
settlements and the decline in operating costs and expenses offset in part by
lower production volumes. In addition, the 1992 net loss included an
asset-writedown charge and an extraordinary gain.

CAPITAL RESOURCES AND LIQUIDITY

American's principal sources of capital are net cash provided by operating
activities and proceeds from financing activities. During the past three years,
the Company has also generated cash flows from the sales of low-value and
nonstrategic oil and gas properties.

Net cash provided by operating activities totaled $7.7 million in 1994
compared to $24.7 million in 1993 and $14.2 million in 1992. The decrease from
1993 to 1994 was primarily due to higher production costs on a per unit of
production basis. In addition, cash flow for 1993 included $15.6 million of gas
contract settlement proceeds. Although the Company expects the APPL
Consolidation to have a favorable impact on operating cash flow, future cash
flows will also be influenced by oil and gas prices and the results from ongoing
drilling operations, neither of which can be predicted.

Proceeds from the sales of oil and gas properties totaled $2.6 million,
$35.7 million and $2.9 million in 1994, 1993 and 1992, respectively. The cash
received in 1993 included $34.1 million of proceeds from the sales of the
Company's Canadian assets and 40% of the Company's interest in the Henderson
Canyon Field. In 1995, American plans to divest of high-cost, low-value
properties to reduce the Company's operating costs and increase efficiency.

At the Company's annual meeting of stockholders held in June 1994,
American's stockholders authorized an increase in the number of authorized
shares of the Company's common stock to 200,000,000 shares. This increase
allowed American to privately issue 1.5 million shares of common stock in August
1994, resulting in proceeds of $2.1 million. The proceeds were used to fund
various development projects and provide additional working capital. The
increase in authorized shares also enabled American to issue the necessary
shares to complete the APPL Consolidation as described below.

Pursuant to the APPL Consolidation, the Company acquired investors'
interests in the APPL Programs during 1994 for a combination of $31.1 million in
cash borrowed under the bridge facility and 42.7 million shares of the Company's
common stock. As part of this transaction, $13.6 million of nonrecourse debt was
eliminated. In early 1995, the Company repurchased the remaining two investors'
interests in the APPL Debt Programs for a combination of $1.3 million in cash
and the issuance of 3.4 million shares of the Company's common stock, thereby
eliminating the remaining $6.6 million of nonrecourse debt outstanding at
year-end 1994. Also, New York Life has agreed to transfer certain of its APPL
Program interests not acquired in the APPL Consolidation to ANCON in early 1995.
The Company will acquire a 1% interest in these properties at the time of the
transfer and has the option to acquire up to an additional 19% interest within
six months.

In December 1994, the Company entered into a new long-term revolving bank
credit agreement which amended and restated the bank credit agreement previously
in effect. The borrowing base, or amount available, under the new bank credit
facility is currently $65.0 million, up from $30.0 million at year-end 1993. The
amount outstanding under this facility was $28.0 million at December 31, 1994,
which represents an increase of $21.5 million from December 31, 1993. The
borrowings during 1994 were used to fund capital projects and reduce existing
liabilities. In February 1995, the Company used excess borrowing capacity under
this facility to refinance the bridge facility, of which $31.1 million was
outstanding at December 31, 1994. The borrowing base under the bank credit
facility is subject to semiannual redetermination by the Company's bank group.
The borrowing base is currently in the process of being redetermined. Management
expects, based on current discussions with its lenders, that the borrowing base
will be at least $65.0 million.

The bank credit agreement and the 11% senior subordinated notes include
covenants requiring net worth of the Company to not be less than $65.0 million
less write-downs plus 50% of any equity issuances. For purposes of this test,
write-downs may not exceed $6.8 million through June 30, 1994 plus any noncash
charges after June 30, 1994 in connection with proposed pronouncements on
accounting for impairments of long-lived assets. At December 31, 1994, the
Company's calculated net worth requirement was $62.4 million and the Company's
stockholders' equity was $87.7 million. Cash dividends are prohibited on the
Company's common stock and preferred dividends are limited to the lesser of 10%
of the preferred stock offering proceeds or $7.5 million in any one year.
Dividends paid on the Company's convertible preferred stock during 1994 totaled
$1.8 million. These agreements also contain cross-default provisions.

The most significant capital expenditure for American during 1994 was the
acquisition of the majority of the APPL Program interests for $87.4 million,
including the value of the shares issued. In addition, the Company acquired $3.3
million of other oil and gas properties, representing purchases of working
interests in the Company's primary domestic operating areas, compared to $4.3
million in 1993 and $3.3 million in 1992. Expenditures for development drilling
increased to $15.3 million in 1994 from $9.2 million in 1993 and $8.1 million in
1992. Exploration expenditures totaled $5.6 million in 1994, $9.5 million in
1993 and $10.5 million in 1992. The increase in development expenditures and the
reduction in exploration costs from 1993 to 1994 reflect the Company's strategy
to allocate more of its capital resources to development and exploitation
projects and the elimination of its remaining international exploration
commitments, which totaled $2.0 million at year-end 1993. During 1994, the
Company participated in 95 development wells with a 94% success ratio and
performed 70 workover and recompletion operations.

For 1995, the Company has budgeted approximately $20.0 million for capital
expenditures, which amount may be increased depending on oil and gas prices and
capital availability. As in 1994, American's capital program will be focused in
the Company's principal operating areas in the United States. American is
allocating approximately 70% of its budget to development and exploitation
projects, approximately 20% to acquisition activities, including lease
acquisitions, and the remaining 10% for exploratory drilling. The Company's
budget also includes approximately $1.0 million for anticipated expenditures
related to environmental matters.

At December 31, 1994, American had capital commitments for 1995 totaling
$4.3 million. These commitments include current debt obligations of $154,000,
operating lease obligations for 1995 of $2.4 million and preferred stock
dividend payments totaling $1.8 million. Over the next several years, the
Company will have additional capital requirements, including annual principal
payments of $5.6 million on its 11% senior

subordinated notes beginning in December 1997. The Company is also scheduled to
begin repaying the principal on its bank credit facility over twelve quarterly
installments commencing March 31, 1997.

At December 31, 1994, the Company's ratio of current assets to current
liabilities was .86:1, up from .69:1 at year-end 1993. The improvement in the
Company's working capital position was due to several factors. As a result of
the APPL Consolidation, American's accounts receivable balance increased and the
Company eliminated the majority of its development obligation to net profits
investors. Also, the Company had an increase in partnership receivables and a
decrease in accounts payable due to the timing of cash receipts and payments,
respectively. The Company anticipates that it will operate with a working
capital deficit primarily due to timing differences between the receipt of
reimbursements from other working interest owners in the properties operated by
American and payment of expenses with respect to such properties.

The Company intends to fund its planned capital expenditures, commitments
and working capital requirements through cash flows from operations and
borrowings under its bank credit facility. However, if there are changes in oil
and gas prices, which correspondingly affect cash flows and bank borrowings,
American has the discretion and ability to adjust its capital budget. Other
potential sources of capital for the Company include property sales, financings
through the placement of notes or the sale of equity. Management believes that
the Company will have sufficient capital resources and liquidity to fund its
capital expenditures and meet its financial obligations as they come due.

ENVIRONMENTAL MATTERS

The Company is subject to an increasing number of federal, state and local
laws and regulations governing the discharge of materials into the environment
or otherwise relating to the protection of the environment. The Company has
conducted a review of its operations with particular attention to environmental
compliance. The Company believes it has acted as a prudent operator and is in
substantial compliance with environmental laws and regulations. These
environmental provisions are expected to have an increasingly significant impact
on the conduct of American's business. The Company has recorded site remediation
costs of $2.4 million in 1994. Prior to 1994, the Company's cost to comply with
environmental provisions was not material. American can not predict what impact
environmental laws and regulations will have on its future performance. However,
the Company believes that such laws do not affect the Company in a materially
different manner from other similarly situated companies in the oil and gas
industry.

The Company is currently a defendant in five lawsuits, as discussed in
Note 13 to the Consolidated Financial Statements in Item 8, alleging the
presence of naturally occurring radioactive materials ("NORM") and other
hazardous substances as a result of oil and gas operations conducted on
properties operated or owned by the Company and its predecessors in title or
NORM contaminated pipe delivered to a pipe cleaning facility, of which the
Company contributed a minor amount of pipe. American has remediated several of
these properties and believes these remediation efforts will significantly
reduce the basis for the plaintiffs' damage claims. Because of the early stages
of these proceedings, it is not possible to quantify what liabilities, if any,
the Company might incur.

CHANGING OIL AND GAS PRICES

The Company's revenues and cash flows are affected by changes in oil and
gas prices. Moreover, the Company's bank borrowing capacity is largely dependent
upon oil and gas prices. Oil and gas prices are subject to substantial seasonal,
political and other fluctuations that the Company is unable to control or
accurately predict.

During 1994, American's average realized gas price fluctuated from a high
of $2.30 per Mcf in March to a low of $1.63 per Mcf in October. Gas prices have
fallen subsequent to year-end 1994 to a recent price of $1.44 per MMBtu, which
is the quoted price for March 1995 production for Henry Hub. The Company's
average realized oil price ranged from $12.84 to $17.61 per Bbl during 1994. To
help mitigate the impact of oil and gas price declines, the Company has several
swap agreements in place with approximately 41% and

23% of the Company's December 1994 average daily oil production and gas
production, respectively, hedged through June 1995 and March 1995, respectively.

POSSIBLE RESTRUCTURING OF THE BOARD OF DIRECTORS

Based on discussions with several of the APPL Program partners who
exchanged their interests for common stock of American, the Company plans to
restructure its Board of Directors to decrease the size of the Board and, among
other things, to increase the number of Board members with senior level oil and
gas operating backgrounds.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is set forth in a separate section
of this Report on Form 10-K. See the accompanying "Index of Financial
Statements" at Page F-1. Such information is incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.
23

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a) Directors

The information set forth under the caption "Election of Directors" in the
Company's Proxy Statement for its 1995 Annual Meeting of Stockholders, which is
to be filed with the Securities and Exchange Commission within 120 days of
December 31, 1994 pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended (the "Act"), is incorporated herein by reference.

(b) Executive Officers

Information concerning executive officers is set forth in Item 1. of
Part I hereof.

ITEM 11. EXECUTIVE COMPENSATION

The information set forth under the caption "Executive Compensation" in
the Company's Proxy Statement for its 1995 Annual Meeting of Stockholders, which
is to be filed with the Securities and Exchange Commission within 120 days of
December 31, 1994 pursuant to Regulation 14A under the Act, is incorporated
herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information set forth under the captions "Principal Security Holders"
and "Security Ownership of Management" in the Company's Proxy Statement for its
1995 Annual Meeting of Stockholders, which is to be filed with the Securities
and Exchange Commission within 120 days of December 31, 1994 pursuant to
Regulation 14A under the Act, is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information set forth under the caption "Certain Relationships and
Related Transactions" in the Company's Proxy Statement for its 1995 Annual
Meeting of Stockholders, which is to be filed with the Securities and Exchange
Commission within 120 days of December 31, 1994 pursuant to Regulation 14A under
the Act, is incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

1. Financial Statements

See the accompanying "Index of Financial Statements" at Page F-1.

3. Exhibits

See the accompanying "Index of Exhibits" at Page X-1.

(b) The registrant filed no reports on Form 8-K during the fourth quarter
of 1994.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 30th day of
March, 1995.

AMERICAN EXPLORATION COMPANY
(Registrant)

By: /S/ MARK ANDREWS
Mark Andrews
Chairman of the Board
and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, on the 30th day of March, 1995.

SIGNATURE TITLE
--------- -----

/S/ MARK ANDREWS Chairman of the Board
Mark Andrews and Chief Executive Officer
(Principal Executive Officer)

/S/ JOHN M. HOGAN Senior Vice President
John M. Hogan and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)

/S/ O. DONALDSON CHAPOTON Director
O. Donaldson Chapoton

/S/ HARRY W. COLMERY, JR. Director
Harry W. Colmery, Jr.

/S/ IRVIN K. CULPEPPER, JR. Director
Irvin K. Culpepper, Jr.

/S/ WALTER J.P. CURLEY Director
Walter J.P. Curley

/S/ PHILLIP FROST, M.D. Director
Phillip Frost, M.D.

/S/ PETER G. GERRY Director
Peter G. Gerry

/S/ H. PHIPPS HOFFSTOT, III Director
H. Phipps Hoffstot, III

/S/ JOHN E. JUSTICE, III Director
John E. Justice, III

/S/ MARK KAVANAGH Director
Mark Kavanagh

/S/ JOHN H. MOORE Director
John H. Moore

/S/ PETER P. NITZE Director
Peter P. Nitze
27

AMERICAN EXPLORATION COMPANY AND SUBSIDIARIES

INDEX OF FINANCIAL STATEMENTS

PAGE
Financial Statements:
Report of Independent Public Accountants ............................... F-2

Consolidated Balance Sheets as of December 31, 1994 and 1993 ........... F-3

Consolidated Statements of Operations for the Three Years Ended
December 31, 1994 .................................................... F-4

Consolidated Statements of Cash Flows for the Three Years Ended
December 31, 1994 .................................................... F-5

Consolidated Statements of Stockholders' Equity for the Three
Years Ended December 31, 1994 ........................................ F-6

Notes to Consolidated Financial Statements ............................. F-7

Supplemental Information on Oil and Gas Producing Activities ........... F-29

F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors,
American Exploration Company:

We have audited the accompanying consolidated balance sheets of
American Exploration Company (a Delaware corporation) and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Exploration Company and subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.

As explained in Note 2 to the consolidated financial statements,
effective December 31, 1994, the Company changed its method of accounting for
impairments of proved oil and gas properties.

ARTHUR ANDERSEN LLP

Houston, Texas
March 30, 1995

F-2

CONSOLIDATED BALANCE SHEETS
AMERICAN EXPLORATION COMPANY AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)

DECEMBER 31,
--------------------------------
1994 1993
--------- ---------
ASSETS

Current assets:
Cash and temporary cash investments .................................................. $ 9,973 $ 12,236
Accounts receivable .................................................................. 10,652 7,888
Receivables from partnerships ........................................................ 4,488 987
Inventory ............................................................................ 293 352
Other current assets ................................................................. 721 766
--------- ---------
Total current assets ............................................................... 26,127 22,229
--------- ---------
Property, plant and equipment:
Oil and gas properties, based on successful
efforts accounting ................................................................. 318,453 257,953
Other property and equipment ......................................................... 12,530 12,102
--------- ---------
330,983 270,055
Less: Accumulated depreciation, depletion and
amortization ....................................................................... 135,578 109,170
--------- ---------
Property, plant and equipment, net ................................................. 195,405 160,885
--------- ---------
Other assets ........................................................................... 2,362 2,484
--------- ---------
Total assets ..................................................................... $ 223,894 $ 185,598
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .................................................... $ 154 $ 746
Accounts payable ..................................................................... 14,391 17,721
Accrued liabilities .................................................................. 15,629 11,946
Obligation to net profits investors .................................................. 55 1,939
--------- ---------
Total current liabilities .......................................................... 30,229 32,352
--------- ---------
Long-term debt ......................................................................... 69,712 62,848
--------- ---------
Note payable to related party .......................................................... 31,128 --
--------- ---------
Other liabilities ...................................................................... 4,779 3,161
--------- ---------
Deferred income taxes .................................................................. 336 831
--------- ---------
Commitments and contingencies (Note 13)

Stockholders' equity:
Convertible preferred stock, $1.00 par value, 4,000 shares
issued and outstanding in 1994 and 1993 ............................................ 4 4
Common stock, $.05 par value; issued: 114,775,000 shares (1994)
and 70,605,368 shares (1993); outstanding: 114,683,132 shares
(1994) and 70,513,500 shares (1993) ................................................ 5,739 3,531
Additional paid-in capital ........................................................... 267,652 212,419
Accumulated deficit .................................................................. (184,676) (128,060)
Treasury stock, at cost; 91,868 shares (1994 and 1993) ............................... (342) (342)
Unearned compensation ................................................................ (525) (916)
Notes receivable from officers ....................................................... (142) (230)
--------- ---------
Total stockholders' equity ......................................................... 87,710 86,406
--------- ---------
Total liabilities and stockholders' equity ....................................... $ 223,894 $ 185,598
========= =========

The accompanying notes are an integral part of these consolidated financial
statements.
F-3

CONSOLIDATED STATEMENTS OF OPERATIONS
AMERICAN EXPLORATION COMPANY AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)

YEAR ENDED DECEMBER 31,
-----------------------------------------------
1994 1993 1992
--------- -------- ----------

REVENUES:
Oil and gas sales .............................................. $ 50,033 $ 49,589 $ 58,560
Gas settlement income .......................................... 374 15,592 1,849
Gain (loss) on sales of oil and gas properties ................. 1,110 (6,894) (1,309)
Other revenues (costs), net .................................... (158) (129) 908
--------- -------- ----------
Total revenues ............................................... 51,359 58,158 60,008
--------- -------- ----------
COSTS AND EXPENSES:
Production and operating ....................................... 21,302 15,998 19,412
Depreciation, depletion and amortization ....................... 29,616 23,635 30,193
General and administrative ..................................... 10,035 7,413 11,047
Taxes other than income ........................................ 5,710 4,601 5,606
Exploration .................................................... 2,559 7,554 7,843
Impairment ..................................................... 33,570 10,975 45,586
--------- -------- ----------
Total costs and expenses ..................................... 102,792 70,176 119,687
--------- -------- ----------
LOSS FROM OPERATIONS ............................................. (51,433) (12,018) (59,679)
--------- -------- ----------
OTHER INCOME (EXPENSE):
Interest expense ............................................... (6,638) (6,847) (9,485)
Other income (expense), net .................................... (2,619) 191 (576)
--------- -------- ----------
Total other expense .......................................... (9,257) (6,656) (10,061)
--------- -------- ----------

LOSS BEFORE INCOME TAXES, MINORITY INTEREST
AND EXTRAORDINARY ITEM ......................................... (60,690) (18,674) (69,740)

Income tax benefit (provision) ................................... 455 (505) (108)
Minority interest in subsidiary .................................. -- (7) 949
--------- -------- ----------

LOSS BEFORE EXTRAORDINARY ITEM ................................... (60,235) (19,186) (68,899)

Extraordinary gain on extinguishment of debt ..................... 5,419 -- 3,100
--------- -------- ----------

NET LOSS ......................................................... (54,816) (19,186) (65,799)

Preferred stock dividends ........................................ (1,800) (75) --
--------- -------- ----------

NET LOSS TO COMMON STOCK ......................................... $ (56,616) $(19,261) $ (65,799)
========= ======== ==========
NET LOSS PER COMMON SHARE:
Primary and fully diluted:
Loss before extraordinary item................................ $ (.77) $ (.28) $ (1.07)
Extraordinary item............................................ .07 -- .05
--------- -------- ----------
NET LOSS PER COMMON SHARE................................... $ (.70) $ (.28) $ (1.02)
========= ======== ==========

The accompanying notes are an integral part of these consolidated financial
statements.
F-4

CONSOLIDATED STATEMENTS OF CASH FLOWS
AMERICAN EXPLORATION COMPANY AND SUBSIDIARIES
(IN THOUSANDS)

YEAR ENDED DECEMBER 31,
-----------------------------------------------
1994 1993 1992
-------- -------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................... $(54,816) $(19,186) $ (65,799)
Adjustments to arrive at net cash provided by
operating activities:
Depreciation, depletion and amortization ............................. 29,616 23,635 30,193
Loss (gain) on sales of oil and gas properties ....................... (1,110) 6,894 1,309
Exploration expense .................................................. 1,888 4,720 4,600
Impairment expense ................................................... 33,570 10,975 45,586
Extraordinary gain ................................................... (5,419) -- (3,100)
Other, net ........................................................... 2,909 (150) 347
Changes in operating working capital:
Accounts receivable .................................................. (2,899) 411 4,813
Other current assets ................................................. (320) 920 1,224
Accounts payable and accrued liabilities ............................. 1,874 (1,939) (5,144)
Other operating ........................................................ 2,454 (1,563) 208
-------- -------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES .......................... 7,747 24,717 14,237
-------- -------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of oil and gas properties .................................. (28,387) (4,273) (3,283)
Development and exploration expenditures ............................... (20,944) (18,675) (18,555)
Other capital expenditures ............................................. (558) (1,219) (678)
Sales of oil and gas properties ........................................ 2,638 35,666 2,881
Other investing ........................................................ (3,683) (2,488) (989)
-------- -------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ................ (50,934) 9,011 (20,624)
-------- -------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Bank debt borrowings ................................................... 23,000 12,500 109,650
Bank debt repayments ................................................... (1,500) (60,000) (129,650)
Issuance of 11% senior subordinated notes .............................. -- -- 10,000
Borrowings under bridge credit facility ................................ 32,078 -- --
Repayments under bridge credit facility ................................ (950) -- --
Repayments of other debt ............................................... (8,622) (4,001) (10,808)
Issuance of common stock and warrants .................................. 2,100 1,348 28,096
Issuance of preferred stock ............................................ -- 20,000 --
Preferred stock dividends .............................................. (1,800) (75) --
Debt and equity issuance costs and other ............................... (3,382) (2,152) (4,598)
-------- -------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ................ 40,924 (32,380) 2,690
-------- -------- ---------

EFFECT OF EXCHANGE RATE CHANGES ON CASH .................................. -- (9) 166
-------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND
TEMPORARY CASH INVESTMENTS ............................................ (2,263) 1,339 (3,531)
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF YEAR ................. 12,236 10,897 14,428
-------- -------- ---------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR ....................... $ 9,973 $ 12,236 $ 10,897
======== ======== =========

The accompanying notes are an integral part of these consolidated financial
statements.
F-5

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AMERICAN EXPLORATION COMPANY AND SUBSIDIARIES
(IN THOUSANDS)

FOREIGN
CONVERTIBLE ADDITIONAL CURRENCY
PREFERRED COMMON PAID-IN ACCUMULATED TRANSLATION TREASURY
STOCK STOCK CAPITAL DEFICIT ADJUSTMENT STOCK
-------- -------- ---------- ------------ ---------- -------

BALANCE, DECEMBER 31, 1991 ....................... $ -- $2,816 $ 167,844 $ (43,000) $ 102 $(329)
Sale of common stock ........................... -- 660 27,431 -- -- --
Exercise of stock options ...................... -- -- 16 -- -- (13)
Exercise of warrants ........................... -- -- 5 -- -- --
Stock issuance costs ........................... -- -- (2,340) -- -- --
Canadian Conquest debt restructuring costs ..... -- -- (410) -- -- --
Reclassification to assets held for sale<F1> ... -- -- -- -- 4,908 --
Translation adjustment ......................... -- -- -- -- (6,731) --
Net loss ....................................... -- -- -- (65,799) -- --
---- ------ --------- --------- ------- -----

BALANCE, DECEMBER 31, 1992 ....................... -- 3,476 192,546 (108,799) (1,721) (342)
Sale of convertible preferred stock ............ 4 -- 19,996 -- -- --
Sale of common stock ........................... -- 55 1,385 -- -- --
Stock issuance costs ........................... -- -- (1,508) -- -- --
Dividends on preferred stock ($18.75 per share) -- -- -- (75) -- --
Unearned compensation on restricted
common stock ................................ -- -- -- -- -- --
Amortization of unearned compensation .......... -- -- -- -- -- --
Issuance of notes receivable to officers ....... -- -- -- -- -- --
Sale of Canadian companies ..................... -- -- -- -- 1,754 --
Translation adjustment ......................... -- -- -- -- (33) --
Net loss ....................................... -- -- -- (19,186) -- --
---- ------ --------- --------- ------- -----
BALANCE, DECEMBER 31, 1993 ....................... 4 3,531 212,419 (128,060) -- (342)
Issuance of shares in APPL Consolidation ....... -- 2,133 54,097 -- -- --
Sale of common stock ........................... -- 75 2,025 -- -- --
Stock issuance costs ........................... -- -- (889) -- -- --
Dividends on preferred stock ($450.00 per share) -- -- -- (1,800) -- --
Amortization of unearned compensation .......... -- -- -- -- -- --
Repayments of notes receivable to officers ..... -- -- -- -- -- --
Net loss ....................................... -- -- -- (54,816) -- --
---- ------ --------- --------- ------- -----

BALANCE, DECEMBER 31, 1994 ....................... $ 4 $5,739 $ 267,652 $(184,676) $ -- $(342)
==== ====== ========= ========= ======= =====

NOTES
RECEIVABLE
UNEARNED FROM
COMPENSATION OFFICERS
------------ --------

BALANCE, DECEMBER 31, 1991 ....................... $ -- $ --
Sale of common stock ........................... -- --
Exercise of stock options ...................... -- --
Exercise of warrants ........................... -- --
Stock issuance costs ........................... -- --
Canadian Conquest debt restructuring costs ..... -- --
Reclassification to assets held for sale<F1> ... -- --
Translation adjustment ......................... -- --
Net loss ....................................... -- --
------- -----

BALANCE, DECEMBER 31, 1992 ....................... -- --
Sale of convertible preferred stock ............ -- --
Sale of common stock ........................... -- --
Stock issuance costs ........................... -- --
Dividends on preferred stock ($18.75 per share) -- --
Unearned compensation on restricted
common stock ................................ (1,007) --
Amortization of unearned compensation .......... 91 --
Issuance of notes receivable to officers ....... -- (230)
Sale of Canadian companies ..................... -- --
Translation adjustment ......................... -- --
Net loss ....................................... -- --
------- -----
BALANCE, DECEMBER 31, 1993 ....................... (916) (230)
Issuance of shares in APPL Consolidation ....... -- --
Sale of common stock ........................... -- --
Stock issuance costs ........................... -- --
Dividends on preferred stock ($450.00 per share) -- --
Amortization of unearned compensation .......... 391 --
Repayments of notes receivable to officers ..... -- 88
Net loss ....................................... -- --
------- -----

BALANCE, DECEMBER 31, 1994 ....................... $ (525) $(142)
======= =====
<FN>

<F1> Amount represents the reclassification, to assets held for sale, of the
foreign currency translation adjustment related to the Canadian
foothill properties that the Company sold in mid-1993 (see Note 4).

The accompanying notes are an integral part of these consolidated financial
statements.
F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN EXPLORATION COMPANY AND SUBSIDIARIES

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts
of American Exploration Company and its majority-owned subsidiaries
(collectively referred to as "American" or the "Company"). The Company's
investments in associated oil and gas programs are accounted for using the
proportionate consolidation method, whereby the Company's proportionate share of
each program's assets, liabilities, revenues and expenses is included in the
appropriate accounts in the consolidated financial statements. All significant
intercompany balances and transactions have been eliminated in consolidation.
Certain amounts in prior years' consolidated financial statements have been
reclassified to conform with current classifications.

MINORITY INTEREST

Minority interest in subsidiary represents the minority stockholders'
proportionate share of the net loss of Canadian Conquest Exploration, Inc.
("Canadian Conquest"). The Company held slightly more than a 50% interest in
Canadian Conquest until September 1992 when the Company increased its ownership
to 90% as part of a recapitalization of that entity. In June 1993, American sold
its interest in Canadian Conquest (see Note 4).

INVENTORIES

Inventories are recorded at cost and stated at the lower of cost or
market.

PROPERTY, PLANT AND EQUIPMENT

The Company accounts for its oil and gas exploration and production
activities using the successful efforts method of accounting. Under this method,
acquisition costs for proved and unproved properties are capitalized when
incurred. Exploration costs, including geological and geophysical costs and
costs of carrying and retaining unproved properties, are charged to expense as
incurred. The costs of drilling exploratory wells are capitalized pending
determination of whether each well has discovered proved reserves. If proved
reserves are not discovered, such drilling costs are charged to expense. Costs
incurred to drill and equip development wells, including unsuccessful
development wells, are capitalized. Internal costs related to the acquisition,
development and exploration of oil and gas properties are expensed as incurred.
Interest is capitalized on qualifying assets, primarily unproved and unevaluated
properties. Depreciation, depletion and amortization ("DD&A") of the cost of
producing oil and gas properties is computed on the unit-of-production method.
The Company also accrues for platform abandonment costs related to its offshore
platform facilities on the unit-of-production method. The Company anticipates
total abandonment costs to be approximately $7.2 million. As of December 31,
1994, the Company had accrued $5.1 million, which is included in accumulated
DD&A. Unproved properties are assessed periodically, and any impairment in value
is recognized currently as impairment expense.

Property, plant and equipment other than oil and gas properties are
depreciated by the straight-line method at rates based on the estimated useful
lives of the assets. Repairs and maintenance are charged to expense as incurred;
renewals and betterments are capitalized.

F-7

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

INVESTMENT PROGRAMS

The Company manages various investment programs which were formed
during 1983-1992 to acquire interests in producing oil and gas properties. Costs
associated with the organization of future investment programs were deferred as
other current assets until formation, at which time a reimbursement was received
from program investors (see Note 10). The Company charges each investment
program fees for reimbursement of expenses incurred in managing the program's
operations and certain fees for services provided by technical employees of the
Company. Such fees are recorded as reductions to general and administrative
expense (see Note 10).

DERIVATIVES

The Company periodically enters into swap agreements in order to hedge
against volatility in oil and gas prices. Gains or losses on these transactions
are reported as a component of oil and gas sales as the associated production
occurs.

GAS BALANCING

The Company utilizes the sales method of accounting for natural gas
revenues whereby revenues are recognized based on the amount of gas sold to
purchasers. The amount of gas sold may differ from the amount to which the
Company is entitled based on its working interests in the properties. At
December 31, 1994 and 1993, the Company had recorded a liability of $3.7 million
and $2.5 million, respectively, for properties having insufficient reserves to
offset the gas imbalance. The increase from 1993 to 1994 primarily relates to
imbalances acquired through the Company's acquisition of investors' interests in
a series of institutional investment programs (the "APPL Programs") (see
Note 3).

FOREIGN CURRENCY TRANSLATION

The results of operations attributable to the Company's Canadian
operations, which were sold in mid- 1993, were measured using the local currency
as the functional currency. The adjustments resulting from the translation of
the assets and liabilities and income statement accounts of the Canadian
operations were accumulated in the foreign currency translation adjustment
component of stockholders' equity. In conjunction with the sales of the
Company's Canadian operations, the Company wrote off the foreign currency
translation adjustment balance of approximately $1.8 million to loss on sales of
oil and gas properties (see Note 4). The U.S. dollar has been the functional
currency for the Company's other foreign operations. Foreign currency
transaction gains and losses are recognized currently in other income and were
not material for 1993 or 1992. The Company had no foreign operational activity
during 1994.

INCOME TAXES

Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes". SFAS No. 109 requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the differences between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
The adoption of SFAS No. 109 did not have a material impact on the Company's
financial position or results of operations (see Note 11).

F-8

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

NET LOSS PER COMMON SHARE

Net loss per common share has been computed by dividing net loss, after
reductions for certain preferred stock dividends, by the weighted average number
of common shares and common share equivalents outstanding during each year.
Common share equivalents include the average shares issuable upon assumed
exercise of stock options and warrants which would have a dilutive effect in the
respective periods. Any assumed conversions of subordinated convertible notes
payable or assumed exercise of stock options or warrants were antidilutive for
1994, 1993 and 1992. In addition, any assumed conversion of convertible
preferred stock was antidilutive for 1994 and 1993. The weighted average shares
used in the primary earnings per share calculations were 80,608,000 in 1994,
69,616,000 in 1993, and 64,195,000 in 1992.

CONSOLIDATED STATEMENTS OF CASH FLOWS

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.

(2) CHANGE IN METHOD OF ACCOUNTING FOR IMPAIRMENTS OF PROVED OIL AND GAS
PROPERTIES

During 1990 and 1991, the Company acquired significant proved reserves
through the acquisitions of Hershey Oil Corporation and Conquest Exploration
Company. These reserves were acquired with an expectation that oil and gas
prices would trend upward over time. Since these acquisitions were made, oil and
gas prices have been subject to considerable volatility, resulting in economic
losses of proved reserves and corresponding increases in the Company's DD&A rate
per barrel of oil equivalent. Currently, the Securities and Exchange Commission
has required, at a minimum, a company using the successful efforts method of
accounting to recognize an impairment of proved oil and gas property costs if,
on a company-wide basis, those costs exceed the undiscounted after-tax future
net cash flows from proved reserves. The Company has been following that
methodology and has been in compliance with it. Effective December 31, 1994, the
Company changed its accounting policy related to recognizing impairment of
proved oil and gas properties to a policy that is consistent with the provisions
of the Financial Accounting Standards Board ("FASB") exposure draft, "Accounting
for the Impairment of Long-Lived Assets".

Under the Company's new policy, if the book value of an individual
proved field is greater than its undiscounted future net cash flow from proved
reserves, then an impairment is recognized for the difference between the net
book value and the fair value. The Company has recorded a noncash impairment
charge of approximately $25.0 million in 1994. The fair value used to calculate
the impairment for an individual field is equal to the present value of its
future net cash flows.

(3) APPL CONSOLIDATION

During the period 1983-1990, American obtained long-term funding for
many of its oil and gas property acquisitions through the APPL Programs. As of
December 31, 1993, institutional investors had committed $507.7 million to these
programs, while the Company had committed $54.7 million. The APPL Programs
consisted primarily of limited partnerships ("APPL Partnerships") in which the
Company acted as general partner and the institutions invested as limited
partners. To meet the needs of tax-exempt investors, the Company also formed
programs structured as secured debt financings ("APPL Debt Programs") and
programs which invested in net profits interests.

F-9

(3) APPL CONSOLIDATION (CONTINUED)

During 1994 and January 1995, the Company purchased limited partners'
interests in the APPL Partnerships and net profits interests and debt interests
in the APPL Debt Programs (the "APPL Consolidation"). The consideration paid for
the acquisition of the APPL interests in 1994 was a combination of $31.1 million
in cash and 42.7 million shares of the Company's common stock. In connection
with the transaction, $13.6 million in nonrecourse debt was eliminated,
resulting in an extraordinary gain totaling $5.4 million. In January 1995, the
Company repurchased the remaining two investors' interests in the APPL Debt
Programs for a combination of $1.3 million in cash and the issuance of 3.4
million shares of the Company's common stock, thereby eliminating the remaining
$6.6 million of nonrecourse debt outstanding at year-end 1994. The elimination
of the APPL debt in 1995 resulted in an extraordinary gain of $2.5 million. No
income tax expense has been recognized on the extraordinary gains.

In addition to the acquisition of its interests in certain APPL
Programs by American, New York Life Insurance Company ("New York Life") has
agreed to transfer certain of its interests not acquired in the APPL
Consolidation to ANCON Partnership Ltd. ("ANCON"). ANCON was formed at the end
of 1993 by American and a subsidiary of New York Life to consolidate New York
Life's other oil and gas holdings. The Company serves as general partner of
ANCON and is required to purchase a 1% interest in any properties transferred to
the partnership by New York Life. American has the option to acquire up to an
additional 19% interest within six months of the transfer as allowed under the
partnership agreement. The transfer of New York Life's APPL Program interests to
ANCON is expected to occur in early 1995, with the Company acquiring a 1%
interest in such properties at that time.

The Company financed the cash portion of the APPL Consolidation through
a $40.0 million nonrecourse secured credit facility ("bridge facility") extended
by New York Life (see Note 6).

The following pro forma summary of consolidated results of operations
for the years ended December 31, 1994 and 1993 give effect to the APPL
Consolidation as if it had occurred as of the beginning of 1993.

(in thousands except per share amounts) YEAR ENDED DECEMBER 31,
-------------------------
1994 1993
---------- ----------

Pro forma revenues ............................... $ 75,612 $ 94,937

Pro forma loss before extraordinary item ......... (56,034) (16,465)

Pro forma net loss to common stock ............... (57,834) (8,404)

Pro forma net loss per common share:
Primary and fully diluted:
Loss before extraordinary item ............... $ (.51) $ (.15)
Net loss ..................................... (.51) (.08)

Weighted average shares outstanding:
Primary and fully diluted ...................... 113,783 112,286

The pro forma amounts do not purport to be indicative of the results of
operations of American that may be reported in the future or that would have
been reported had this transaction occurred as of January 1, 1993.

F-10

(4) DIVESTITURES

The Company received cash proceeds of $2.6 million, $35.7 million and
$2.9 million from the sales of oil and gas properties in 1994, 1993 and 1992,
respectively. These sales resulted in a gain of $1.1 million in 1994 and losses
of $6.9 million in 1993 and $1.3 million in 1992. Property sales in 1994 and
1992 related to the divestiture of low-value properties while the 1993 sales
related primarily to the Company's divestiture of its Canadian operations as
well as the sale of a partial interest in a significant domestic property.

In 1992, the Company decided to sell a portion of its interest in the
Henderson Canyon Field and its Canadian foothill properties. As a result, the
Company wrote these assets down to their estimated current market value and
reported a $39.3 million charge against earnings in 1992. In March 1993,
American sold approximately 40% of its interest in the Henderson Canyon Field to
several of the Company's investment programs for proceeds of approximately $8.7
million. In June and July 1993, the Company sold its Canadian foothill
properties (while retaining a 4% overriding royalty interest in these
properties) and also sold its 90% equity interest in Canadian Conquest and its
wholly owned subsidiary, Conquest Ventures Canada, Inc., for aggregate proceeds
of $26.1 million. The Company recognized losses totaling $4.0 million on the
sales of the Canadian assets. In conjunction with the sales of the Canadian
subsidiaries, the Company also recognized a $1.8 million loss related to the
elimination of the foreign currency translation adjustment balance which was
previously recorded as a component of stockholders' equity. Proceeds from these
sales were primarily used to reduce bank debt. The remaining $1.1 million loss
on sales of oil and gas properties for 1993 related to the sale of minor
properties sold at auction in July 1993.

(5) NYLOG PROGRAMS

From 1985 until early 1992, subsidiaries of the Company and New York
Life formed a series of publicly registered limited partnerships, the New York
Life Oil & Gas Producing Properties Programs ("NYLOG Programs"). The NYLOG
Programs invest in the acquisition and further development of producing oil and
gas properties acquired by the Company. A total of $229.1 million has been
invested by the limited partners in these programs since inception.

New York Life and the Company each pay 5% of property acquisition costs
of the NYLOG Programs and each receives 7.5% of net revenues until payout.
Payout occurs when the limited partners receive distributions equal to their
initial investment. After payout, the Company's and New York Life's interests in
capital costs and net revenues each increase to 12.5%. One of the NYLOG Programs
reached payout during 1992. For the other NYLOG Programs, it is difficult to
predict when or if payout will occur due to the uncertainty of future energy
prices, oil and gas production and operating and administrative costs.

(6) DEBT

The following table details the components of the Company's debt (in
thousands):
DECEMBER 31,
--------------------
1994 1993
------- -------
Bank credit agreement ................... $ 28,000 $ 6,500
Note payable to related party ........... 31,128 --
11% senior subordinated notes ........... 35,000 35,000
APPL Debt promissory notes .............. 6,582 21,674
Other debt .............................. 284 420
------- -------
Total ................................ 100,994 63,594

Less: Current maturities ............... 154 746
------- -------
Total long-term debt ................. $100,840 $62,848
======== =======
F-11

(6) DEBT - (CONTINUED)

BANK DEBT

In December 1994, the Company entered into a new long-term revolving
bank credit agreement which replaced the bank credit agreement previously in
effect. The borrowing base, or amount available, under the new bank credit
facility is currently $65.0 million, up from $30.0 million at year-end 1993. The
amount outstanding under the facility at December 31, 1994 was $28.0 million,
which was classified as long-term debt. The borrowings under this facility
during 1994 were used to fund capital projects and reduce existing liabilities.
In February 1995, the Company used excess borrowing capacity under this facility
to refinance the bridge facility. The Company also had $806,000 in letters of
credit outstanding at December 31, 1994 which are collateralized by the
Company's borrowing base. The borrowing base under this facility is scheduled to
be redetermined semiannually every March and September. In 1994, American paid
fees of $663,000 relating to the activation of its new bank credit facility. The
borrowing base is currently in the process of being redetermined by the banks.
Management expects, based on current discussions with its lenders, that the
borrowing base will be at least $65.0 million.

Borrowings under this facility are secured by substantially all of the
assets of the Company, excluding the assets of the APPL Debt financing
subsidiaries and the assets acquired through bridge financing, as discussed
below. At the option of the Company, borrowings bear interest at (i) LIBOR plus
1.50% or 1.75% or (ii) the higher of (A) the prime rate plus 0.50% or 0.75% or
(B) the federal funds rate plus 1.00% or 1.25%. If the total amounts outstanding
are less than or equal to 70% of the borrowing base, the lower margins are added
to the respective interest rates and vice versa. The weighted average interest
on the Company's bank debt at December 31, 1994 was 9.0%. The Company is
required to pay quarterly a 0.50% annual commitment fee on the difference
between the aggregate commitment of $90.0 million and the daily average amount
outstanding under this facility, including letters of credit. Principal on the
remaining long-term portion is scheduled to be repaid over twelve quarterly
installments commencing March 31, 1997. Interest is payable quarterly or upon
maturity of the borrowing, if shorter, in the case of Eurodollar loans and
monthly in the case of prime rate or federal funds rate loans.

NOTE PAYABLE TO RELATED PARTY

In April 1994, New York Life extended to the Company a $40.0 million
bridge facility to provide bridge financing for the APPL Consolidation and such
other property acquisitions as New York Life shall approve. The Company paid a
0.50% commitment fee for the one-year facility and is required to pay a 1.25%
financing fee on any amounts borrowed. Borrowings bear interest at the 30-day
A1/P1 commercial paper rate plus 3% to 6% depending upon the time elapsed since
the initial funding date. The weighted average interest on the bridge facility
at December 31, 1994 was 10.01%. Borrowings under this facility are secured by
the interests acquired. At December 31, 1994, the amount outstanding under the
bridge facility was $31.1 million and is classified as long-term debt pursuant
to management's refinancing of such amount as long-term debt under the bank
credit facility in February 1995.

11% SENIOR SUBORDINATED NOTES

In December 1991, the Company privately placed $35.0 million in senior
subordinated notes and immediately exercisable detachable warrants with three
institutional investors. The notes bear interest at 11% payable semiannually
every June and December. The Company is required to begin repaying principal
with annual installments of $5.6 million in December 1997. The final principal
payment of $12.6 million is payable in December 2001. The warrants grant the
holders the right to purchase approximately 11.5 million shares, as adjusted for
issuances of stock and warrants subsequent to 1991, of the Company's common
stock at an exercise price of $2.26 per share, subject to adjustment. In
addition, each holder of the warrants has the option to tender the notes in lieu
of cash as consideration for the exercise price.

F-12

(6) DEBT - (CONTINUED)

APPL DEBT PROMISSORY NOTES

During 1987 and 1988, wholly owned subsidiaries of the Company financed
90% of the cost of certain property acquisitions by selling promissory notes and
production payments to the investors in the APPL Debt Programs. The Company
eliminated $13.4 million of the APPL debt in 1994 through the APPL
Consolidation. As part of the January 1995 APPL Consolidation transaction, the
Company purchased the interests of the remaining investors in the APPL Debt
Programs, thereby eliminating the $6.6 million outstanding balance at December
31, 1994. The elimination of the APPL debt through the APPL Consolidation
resulted in an extraordinary gain on extinguishment of debt of $5.4 million in
1994 and $2.5 million in January 1995. No income tax expense has been recognized
on the extraordinary gains (see Note 3).

In 1992, the Company restructured the nonrecourse debt of one of the
wholly owned subsidiaries associated with the APPL Debt Programs and recognized
an extraordinary gain on extinguishment of debt of $3.1 million, net of
transaction costs. No income taxes were recognized on this extraordinary gain
since the Company incurred a net loss for 1992.

FEES RELATED TO DEBT INSTRUMENTS

The Company incurs fees related to existing and new credit facilities
which are reported as other expense. During 1994, 1993 and 1992, these fees
totaled $2.8 million, $739,000 and $1.3 million, respectively.

DEBT COVENANTS

The bank credit agreement and the 11% senior subordinated notes require
the Company to comply with certain covenants including, but not limited to,
restrictions on indebtedness, investments, payment of dividends and lease
commitments. Cash dividends are prohibited on the Company's common stock and
preferred dividends are limited to the lesser of 10% of the preferred stock
offering proceeds or $7.5 million in any one year. These agreements also include
net worth covenants which were amended effective July 1994 in conjunction with
the issuance of American common stock related to the APPL Consolidation. Net
worth must not be less than $65.0 million less write-downs plus 50% of any
equity issuances. For purposes of this test, write-downs may not exceed $6.8
million through June 30, 1994 plus any noncash charges after June 30, 1994 in
connection with proposed pronouncements on accounting for impairments of
long-lived assets. At December 31, 1994, the Company's calculated net worth
requirement was $62.4 million and the Company's stockholders' equity was $87.7
million. In addition, these agreements contain cross-default provisions.

ANNUAL MATURITIES

Based on the amounts outstanding at December 31, 1994, the aggregate
maturities of debt for the next five years are as follows: 1995 - $154,000; 1996
- $130,000; 1997 - $25.3 million; 1998 - $25.3 million; 1999 - $25.3 million.
The annual maturities do not include any amounts related to the APPL Debt
promissory notes since the promissory notes outstanding at year-end 1994 were
eliminated in January 1995 in conjunction with the APPL Consolidation.

F-13

(7) PREFERRED STOCK

The Company has authorized 100,000 shares of preferred stock, par value
$1.00 per share. The Board of Directors has authority to divide such preferred
stock into one or more series and has authority to fix and determine the
relative rights and preferences of each such series. At December 31, 1994,
American had 4,000 shares of convertible preferred stock outstanding and an
additional 85,000 shares of preferred stock reserved under the Company's
Stockholder Rights Plan.

CONVERTIBLE PREFERRED STOCK

In December 1993, the Company privately placed 800,000 depositary
shares, each representing a 1/200 interest in a share of $450 Cumulative
Convertible Preferred Stock, Series C (the "Convertible Preferred Stock"). The
Convertible Preferred Stock has a stated value of $5,000 per share, with
dividends payable quarterly at the annual rate of $450 per share. The
Convertible Preferred Stock is convertible at any time at the option of the
holders into shares of the Company's common stock at a conversion price of $1.50
per share, subject to adjustment in certain circumstances. Beginning December
31, 1997, the Convertible Preferred Stock will be redeemable at the option of
the Company, in whole or in part, at any time. The initial redemption price is
$5,270 per share, declining ratably on December 31 of each year to a redemption
price of $5,000 per share on and after December 31, 2003, plus accrued and
unpaid dividends.

The Convertible Preferred Stock has a special conversion right that
becomes effective upon the occurrence of certain types of significant
transactions affecting ownership or control of the Company. If the special
conversion right becomes effective, the then prevailing conversion price would
be reduced to the market value of the common stock, not to be reduced below a
minimum conversion price of $1.125 per share of common stock.

STOCKHOLDER RIGHTS PLAN

In September 1993, the Board of Directors of the Company declared a
distribution of one right ("Right") for each outstanding share of common stock
to stockholders of record at the close of business on October 8, 1993 and for
each share of common stock issued by the Company thereafter and prior to the
"Distribution Date", as defined. Each Right entitles the registered holder to
purchase one ten-thousandth of a share (a "Unit") of Series B Preferred Stock at
a price of $7.50 per Unit, subject to adjustment.

The Rights are exercisable only upon the occurrence of certain
triggering events, including the acquisition by a person or group of 15% or more
of the Company's outstanding common stock, other than those persons that
acquired common stock through the APPL Consolidation. If a triggering event
occurs, holders of each Right would be entitled to receive, upon exercise, the
Units of Series B Preferred Stock (or stock of the acquiring entity, as the case
may be) having a value equal to two times the exercise price of the Right. Such
Rights do not extend to any holder whose action triggered the Right.

The Rights may be redeemed in whole by American at $0.01 per Right any
time until the 10th business day following public announcement that a person or
group, other than those persons that acquired common stock through the APPL
Consolidation, has acquired, obtained the right to acquire or otherwise obtained
beneficial ownership of 15% or more of the Company's outstanding common stock.

F-14

(8) COMMON STOCK

The Company has authorized 200,000,000 shares of common stock, of which
114,775,000 shares were issued and 114,683,132 shares were outstanding at
December 31, 1994. A schedule of the changes in the Company's common stock is
provided below:

YEAR ENDED DECEMBER 31,
--------------------------------------------------
1994 1993 1992
----------- ---------- -----------

Outstanding shares at beginning of year ................................ 70,513,500 69,417,231 56,243,947
Issuance of shares in APPL Consolidation ............................... 42,669,632 -- --
Issuance of shares in private offering ................................. 1,500,000 -- --
Issuance of shares in public offering .................................. -- -- 11,170,000
Issuance of shares in Canadian Conquest restructuring .................. -- -- 2,000,000
Issuance of shares to key officers ..................................... -- 1,095,875 --
Exercise of stock options .............................................. -- 200 6,250
Exercise of warrants ................................................... -- -- 2,000
Adjustment of shares issued in Conquest acquisition .................... -- 194 --
Treasury stock transactions ............................................ -- -- (4,966)
----------- ---------- -----------
Outstanding shares at end of year ............................. 114,683,132 70,513,500 69,417,231
=========== ========== ===========

At the Company's annual meeting held in June 1994, American obtained
stockholder approval to increase the number of authorized shares of common stock
from 100,000,000 shares to 200,000,000 shares. Upon obtaining stockholder
approval, the Company reserved 4,444,444 shares for issuance pursuant to the
special conversion rights of the Convertible Preferred Stock. The increase in
the number of authorized shares also allowed American to privately issue 1.5
million shares of common stock in August 1994, resulting in proceeds of $2.1
million. In addition, the Company was able to issue 46.1 million shares of
common stock at fair market value in the APPL Consolidation, including 3.4
million shares of common stock issued in January 1995 (see Note 3).

At December 31, 1994, the Company had outstanding two series of
warrants to purchase common stock. The first series of warrants was issued in
conjunction with the private placement of 11% senior subordinated notes in 1991
and expire in 2001 (the "2001 Warrants"). At year-end 1994, the 2001 Warrants
were priced at $2.26 per share and are callable by the Company beginning in
December 1996, but only in the event that the Company's common stock has traded
at a specified price above the exercise price for a specified period.

The second series of warrants was issued to an institutional investor
in conjunction with the Canadian Conquest restructuring in 1992 and expire in
1999 (the "1999 Warrants"). At year-end 1994, the 1999 Warrants were exercisable
at a price of $2.32 per share and are callable by the Company at the current
exercise price per warrant, but only in the event that the Company's common
stock has traded at a specified price above the current exercise price for a
specified period.

Both the 2001 Warrants and the 1999 Warrants contain provisions which
would adjust the exercise price and number of warrants under certain
circumstances, most of which have a dilutive effect on equity.

Shares of common stock reserved for future issuance as of December 31,
1994 were as follows:

Exercise of stock options ....................................... 2,896,531
Exercise of 2001 Warrants ....................................... 11,528,254
Exercise of 1999 Warrants ....................................... 3,099,440
Conversion of Convertible Preferred Stock ....................... 13,333,333
Special conversion rights of Convertible Preferred Stock ........ 4,444,444
----------
Total shares reserved ........................................... 35,302,002
==========

F-15

(9) EMPLOYEE BENEFIT PLANS

STOCK COMPENSATION PLANS

The American Exploration Company Stock Compensation Plan established
in 1983 (the "1983 Plan") provides for the issuance of up to 5,000,000 shares of
the Company's common stock. The 1983 Plan also authorizes the issuance of stock
appreciation rights in conjunction with stock options and the granting of
restricted common stock and performance shares. No restricted common stock was
issued in 1994 or 1992. In 1993, the executive officers of the Company purchased
797,250 shares of restricted common stock for $.05 per share. The difference
between the aggregate fair market value of the restricted shares purchased and
the purchase price is considered unearned compensation at the time of grant and
compensation is earned ratably over the vesting period of 33 1/3% per year
commencing with the first anniversary of grant. No stock appreciation rights or
performance shares were granted under the 1983 Plan during the three-year
reporting period.

The exercise price, term and other conditions applicable to each
option granted under the 1983 Plan are determined at the time of the grant of
each option and may vary with each option granted. No option may be granted at a
price less than the stock's fair market value on the date of grant. The purchase
price of the shares as to which an option is exercised is payable in cash, the
Company's common stock or a combination of cash and stock.

In conjunction with the Hershey acquisition in 1990, the Hershey stock
option plans were amended and restated such that the Company assumed the
obligation for the stock options outstanding under the Hershey plans at the
acquisition date. At December 31, 1994, there were 622,655 options outstanding
under the amended and restated Hershey plans.

Detailed information on stock option transactions is provided below:

YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1993 1992
----------- ---------- ----------
Options outstanding at beginning of year 3,742,582 5,624,576 4,756,268
Options granted ........................ -- 10,200 1,275,750
Options terminated ..................... (846,051) (1,891,994) (401,192)
Options exercised ...................... -- (200) (6,250)
----------- ---------- ----------
Options outstanding at end of year ..... 2,896,531 3,742,582 5,624,576
=========== ========== ==========

Options exercisable at end of year ..... 2,424,656 2,711,904 3,447,469
=========== ========== ==========

Option price range:
Options granted ........................ $ -- $1.25-1.44 $1.81-2.88
Options terminated ..................... 1.81-5.00 1.81-5.00 2.50-5.00
Options exercised ...................... -- 1.25-1.44 2.00-2.50
Options outstanding at end of year ..... 1.31-4.75 1.31-5.00 1.81-5.00

In November 1994, the Board of Directors adopted the 1994 American
Exploration Company Stock Compensation Plan (the "1994 Plan"), subject to
approval by stockholders at the 1995 Annual Meeting of Stockholders. The purpose
of the 1994 Plan is to attract and retain key employees of the Company by
providing rewards for past performance and incentives for future service. Under
the 1994 Plan, 9,000,000 shares of the Company's common stock are available for
the granting of stock options, restricted common stock and performance shares.
In addition, performance units may be awarded and stock appreciation rights may
be issued in conjunction with the stock options. All terms and conditions of the
various awards are determined at the time of grant. In November 1994, the
Compensation Committee of the Board of Directors, which administers this plan,
granted 2,968,000 stock options, subject to stockholder approval as discussed
above, at an exercise price equal to the fair market value of the Company's
common stock on the date of
F-16

(9) EMPLOYEE BENEFIT PLANS - (CONTINUED)

grant. In addition, several executive officers have the right to receive stock
options covering eight shares for each share of common stock they purchase
between November 1994 and two months after the 1994 Plan is approved up to a
total of 1,600,000 stock options.

PHANTOM STOCK PLAN

In September 1993, the Board of Directors of the Company adopted a
Phantom Stock Plan (the "Phantom Stock Plan"). The purpose of the Phantom Stock
Plan is to provide a further means of motivating and retaining key employees of
the Company by providing rewards for past performance and incentives for future
service. These rewards currently include restricted units and option units;
however, if the 1994 Plan is approved by stockholders, participants in the
Phantom Stock Plan have the right to convert their option units to stock
options.

The executive officers of the Company purchased 298,625 shares of
common stock, purchased 797,250 shares of restricted common stock under the 1983
Plan and were awarded 1,594,500 option units under the Phantom Stock Plan. The
remaining key employees were granted 56,500 restricted units and 113,000 option
units in 1994 and 337,906 restricted units and 675,812 option units in 1993. In
each case, the price for the option units equaled the fair market value of the
Company's common stock on the date of the awards. The grant price for the
restricted units to the remaining key employees was below market value.
Consequently, the Company records a noncash charge to operations over the
vesting period of the restricted units and option units for the difference
between the grant price and the then market value of the common stock. These
noncash charges totaled $22,000 and $25,000 in 1994 and 1993, respectively.

The restricted units awarded vest at 33 1/3% per year commencing with
the first anniversary of grant, and option units vest at 25% per year from date
of grant. Upon vesting, a participant receives a cash payment for the difference
between the grant price and the then market value of the common stock for the
restricted units and option units. Such cash payments totaled $24,000 for 1994.
Under the Phantom Stock Plan, participants do not receive shares of the
Company's common stock.

EMPLOYEE STOCK OWNERSHIP PLAN

The employee stock ownership plan is a noncontributory plan to acquire
shares of the Company's common stock for the benefit of all employees. The
amount of Company contributions to the plan is determined at the discretion of
the Compensation Committee of the Board of Directors. There were no Company
contributions in 1994 or 1993. The Company contributed $920,000 to the plan
during 1992 to acquire 392,420 shares. Company contributions are expensed as
incurred.

In September 1994, the Board of Directors voted to terminate the plan.
Upon obtaining a favorable ruling from the Internal Revenue Service on the
plan's termination, distributions to the plan's participants will commence and
are expected to be concluded in 1995.

EXPLORATION GROUP INVESTMENT PLAN

The Exploration Group Investment Plan, established in 1991, enables the
Company to make available up to 10% of the Company's net revenue interest in
certain domestic exploration prospects to certain employees of the Company
involved in its exploratory activities. Electing participants pay their
designated share of the costs associated with such exploratory prospects and
their interests convert into overriding royalties in the successful prospects.
During 1994, there was no activity in this plan.

F-17

(10) RELATED-PARTY TRANSACTIONS

NOTES RECEIVABLE FROM OFFICERS

At December 31, 1994, the Company held $142,000 of notes receivable
from executive officers of the Company. The Company provided loans to the
executive officers to purchase a portion of the common stock issued in September
1993 in conjunction with the Phantom Stock Plan. The notes bear interest at 3.9%
and are payable in equal installments through October 1996.

NEW YORK LIFE

New York Life is the second largest stockholder of the Company, owning
approximately 9.0% of its voting stock as of December 31, 1994. Since 1983, New
York Life had been a substantial investor in each of the Company's APPL
Programs, providing 35% of the amount committed by co-investors. New York Life
made no investments in the APPL Programs during the past three years. In
conjunction with the APPL Consolidation, New York Life sold certain of its APPL
Program interests to the Company and agreed to transfer its remaining interests
to ANCON (see Note 3). During the period 1985-1992, the Company and a subsidiary
of New York Life, as co-general partners, formed the NYLOG Programs which were
sold to the public by New York Life agents and independent broker-dealers. New
York Life invested $74,000, $1.3 million and $147,000 in the NYLOG Programs for
the years ended December 31, 1994, 1993 and 1992, respectively.

In December 1993, American and a subsidiary of New York Life formed a
new partnership, ANCON (see Note 3). New York Life transferred $9.6 million of
oil and gas properties to the partnership in 1993. American acquired a 20%
interest in these properties for $1.5 million. No properties were contributed to
the partnership in 1994. Capital contributions by New York Life to ANCON for
development activity totaled $813,000 in 1994.

In April 1994, New York Life extended to the Company a $40.0 million
bridge facility (see Note 6). American paid interest, commitment and financing
fees on this facility totaling $1.6 million in 1994. At December 31, 1994, the
Company had outstanding under this facility $31.1 million. In February 1995, the
Company refinanced this amount using excess borrowing capacity under its bank
credit facility.

INVESTMENT PROGRAMS

The Company is the operator on certain properties owned by the NYLOG
Programs, ANCON and joint ventures and accordingly charges these entities and
third party joint interest owners operating fees. The Company is also reimbursed
for costs incurred in managing the operations of the NYLOG Programs and ANCON.
The administrative and technical fees shown below also include amounts related
to the APPL Programs, which were consolidated into American's operations during
1994 and early 1995. The following table summarizes certain fees charged by the
Company to the investment programs and ANCON (in thousands):
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
------ ------ ------
Administrative and technical fees ..... $8,121 $8,190 $8,794
Program formation fees................. -- -- 547

OTHER TRANSACTIONS

Legal fees incurred for services by a law firm in which a partner is a
director of the Company totaled $377,000 in 1994 and $243,000 in 1993. Legal
fees paid to this law firm in 1992 were not material.

F-18

(11) INCOME TAXES

Effective January 1, 1993, the Company adopted SFAS No. 109. The prior
year's financial statements were not adjusted to reflect the new accounting
method, and the cumulative effect related to the adoption of SFAS No. 109 had no
material effect on the Company's financial position or results of operations.
SFAS No. 109 requires the use of an asset and liability approach under which
deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.

The Company reported a 1994 loss before income taxes and extraordinary
item totaling $60.7 million, of which $54.0 million related to domestic
operations and $6.7 million related to foreign operations. The Company's income
tax provision (benefit) for the years ended December 31, 1994, 1993 and 1992 is
detailed below (in thousands):
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
Current:
Federal ............................... $ -- $ 150 $ --
State ................................. 39 476 118
-------- -------- --------
39 626 118
-------- -------- --------
Deferred:
Federal ............................... -- -- --
State ................................. (494) (121) (10)
-------- -------- --------
(494) (121) (10)
-------- -------- --------
Total ............................... $ (455) $ 505 $ 108
======== ======== ========

The difference between the provision (benefit) for income taxes and the
amount which would be determined by applying the statutory federal income tax
rate to loss before income taxes and extraordinary items for the years ended
December 31, 1994, 1993 and 1992 is analyzed below (in thousands):

YEAR ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
Loss before income taxes
and extraordinary item ................ $(60,690) $(18,674) $(69,740)

Income tax provision (benefit)
at the statutory rate ................. $(21,242) $ (6,536) $(23,712)
Change in valuation allowance ......... 22,203 (1,133) 18,732
Federal alternative minimum tax ....... -- 150 --
State income tax ...................... 39 476 118
Other ................................. (1,455) 7,548 4,970
-------- -------- --------
Income tax provision (benefit) ..... $ (455) $ 505 $ 108
======== ======== ========

F-19

(11) INCOME TAXES - (CONTINUED)

The Company's deferred income tax liability at December 31, 1994 and
1993 is comprised of the tax benefit (cost) associated with the following items
(in thousands):
DECEMBER 31,
---------------------------
1994 1993
--------- --------
Deferred tax asset:
Minimum tax carryforwards ............... $ 479 $ 556
Investment tax credit carryforwards ..... 1,873 1,759
State income tax ........................ 3,203 3,238
Net operating loss carryforwards ........ 95,732 90,092
--------- --------
Gross deferred tax asset .............. 101,287 95,645
Valuation allowance ....................... (93,221) (71,018)
--------- --------
8,066 24,627
--------- --------
Deferred tax liability:
State income tax ........................ (336) (831)
Acquisition, exploration and
development costs ...................... (8,066) (24,627)
--------- --------
Gross deferred tax liability .......... (8,402) (25,458)
--------- --------

Net deferred tax liability ................ $ (336) $ (831)
========= ========

The net deferred tax asset valuation allowance of $93.2 million reflects
the amounts for which utilization is not assured due to the expiration of net
operating loss carryforwards and the effects of future drilling costs.

As of December 31, 1994, the Company had cumulative net operating loss
carryforwards ("NOL's") for federal income tax purposes of approximately $274.0
million, of which approximately 20% will expire in the next five years. Included
in the total NOL's are approximately $71.5 million which arose through an
acquisition completed in 1987, and $143.7 million which arose through the
acquisition of Conquest in 1991. These acquired NOL's may be used to offset the
respective subsidiaries' taxable income subject to individual annual and
cumulative limits. In addition to the individual limitations, changes in the
Company's ownership have resulted in an overall limitation on the amount of
benefit to be realized from the NOL carryforwards in the amount of approximately
$13.7 million annually. Any unused portion of the benefit is carried forward.
For 1995, the cumulative limit for utilization of available NOL's is $67.0
million. Unless utilized, the Company's NOL's will begin expiring in 1995. The
Company also has investment tax credit carryforwards of approximately $1.9
million, which begin expiring in 1995. The Company has an alternative minimum
tax credit carryforward of approximately $479,000 which does not expire and is
available to offset regular income taxes in future years, but only to the extent
that regular income taxes exceed the alternative minimum tax in such years.

(12) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS

DERIVATIVES

The Company has only limited involvement with derivative financial
instruments and does not use or issue them for trading purposes. They are used
to manage the risk associated with oil and gas prices.

At December 31, 1994, the Company had several swap agreements in place
to hedge against a downturn in oil and gas prices over the next six months. For
the period January 1995 through March 1995, American has two swap transactions
covering 15,000 MMBtu of gas per day hedged at a weighted average fixed price of
$2.15 per MMBtu. If the market price is above $2.15, the Company will pay 50% of
the difference between
F-20

(12) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS - (CONTINUED)

$2.15 and the market price; and if the market price is below $2.15, the Company
will receive 100% of the difference. The market price is defined as the price
quoted in the first publication of INSIDE F.E.R.C.'S GAS MARKET REPORT for the
month of production for Henry Hub or Houston Ship Channel deliveries. For the
period January 1995 through June 1995, the Company has 362,000 barrels of oil
hedged at a floor of $17.96 per Bbl NYMEX WTI Light Crude Oil. There were no
swap agreements in effect at December 31, 1993.

The Company is exposed to credit loss in the event of nonperformance by
the other party to the swap agreements. However, the Company anticipates that
the counterparty will be able to fully satisfy its obligation under the
agreements.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the carrying values and estimated fair
values of the Company's financial instruments at December 31, 1994 (in
thousands):

CARRYING FAIR
VALUE VALUE
-------- -------
Long-term debt (1)................................ $100,994 $98,538
Price swap agreements (2)......................... 57 806

(1) Fair value is carrying value for the Company's long-term debt, other
than the APPL debt promissory notes, based on the fact these financial
instruments are at the current interest rates available for debt with
similar terms and maturities. Fair value for the APPL debt is the
carrying value less the extraordinary gain recognized subsequent to
year-end 1994 for the elimination of this debt through the APPL
Consolidation.

(2) The carrying value represents the unamortized premium paid by the
Company to enter into the swap agreements. The fair value of the swap
agreements is the estimated amount the Company would receive to
terminate the agreements at December 31, 1994, based on the closing
prices for NYMEX futures contracts on the last available trading date
in December.

The carrying amounts of cash and cash equivalents, trade receivables and
trade payables approximate fair value because of the short maturity of these
instruments.

(13) COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company has operating leases, primarily for office space, which
expire over the next seven years. These operating leases frequently include
renewal options at the then fair rental value and require that the Company pay a
pro rata share of executory costs, including taxes, maintenance and utility
expenses, incurred by the landlord. Future minimum payments under all
noncancelable operating lease obligations, including an estimated pro rata share
of operating expenses, as of December 31, 1994 are as follows (in thousands):

1995......................................................... $ 2,392
1996......................................................... 2,141
1997......................................................... 2,365
1998......................................................... 2,737
1999......................................................... 2,737
Thereafter................................................... 4,334
-----
Total minimum lease payments............................... $ 16,706
==========
F-21

(13) COMMITMENTS AND CONTINGENCIES - (CONTINUED)

The Company had no minimum rentals under noncancelable subleases as of
December 31, 1994. Rent expense totaled $3.9 million, $4.6 million and $5.2
million in 1994, 1993 and 1992, respectively, which includes the Company's share
of executory costs associated with its office leases. Sublease rentals received
during the past three years were not material.

PARTNERSHIP COMMITMENTS

The Company and certain of its subsidiaries act as general partner of a
number of limited partnerships. In such capacity, the Company and such
subsidiaries are generally liable for the obligations of the partnerships to the
extent that partnership assets are insufficient to discharge liabilities.
Several of the investment programs formed by the Company or its subsidiaries
require certain levels of insurance to cover operating and other risks inherent
in the production of oil and gas. Under the terms of these programs, the Company
would be liable for any costs or damages incurred by a program resulting from
the Company's failure to carry the required insurance. The Company believes its
insurance coverage is sufficient as required by the program agreements.

At December 31, 1994, the Company had remaining capital commitments to
the NYLOG Programs of $87,000. The Company also has commitments to buy back
certain NYLOG partnership units. These annual repurchase commitments are based
on formulas contained in the underlying partnership agreements and totaled
approximately $241,000 as of December 31, 1994. In addition, the Company has a
commitment to purchase a 1% interest in any properties transferred to ANCON by
New York Life.

INTERNATIONAL COMMITMENTS

During 1994, the Company sold its remaining interests in Tunisia and
Oman and its permit in offshore Australia. Consequently, the Company has no
international commitments for 1995 or future years.

CONCENTRATION OF CREDIT RISK

The Company's revenues are derived principally from uncollateralized
sales to customers in the oil and gas industry. The concentration of credit risk
in a single industry affects the Company's overall exposure to credit risk
because customers may be similarly affected by changes in economic and other
conditions. The Company has not experienced significant credit losses on such
receivables.

LEGAL PROCEEDINGS

In addition to certain other legal proceedings arising in the ordinary
course of its oil and gas business, the Company is involved in the following
matters.

LOUISIANA STATEWIDE CONTRACT. In December 1992, a U.S. District Court
ruled that Louisiana Intrastate Gas Corporation ("LIG") had underpaid a
subsidiary of the Company under a statewide gas purchase contract ("Statewide
Contract") for the 1989 contract year. Pursuant to the ruling by the U.S.
District Court, it was also determined through arbitration that the Company's
subsidiary was underpaid for the period January 1990 to October 1992. The
Statewide Contract covered certain properties acquired by the Company's
subsidiary in 1988 with ownership in these properties assigned to several of the
Company's investment programs. In December 1992, the Company's subsidiary agreed
to terminate the Statewide Contract effective October 1, 1992 in exchange for a
cash payment from LIG and a three-year replacement contract providing for
market-based pricing. Upon appeal to the Fifth Circuit Court of Appeals, the
Court of Appeals held in December 1994, in a per curiam opinion, that there was
no reversible error and affirmed the trial court's ruling. Neither party
appealed this ruling and in January 1995, the Company received approximately
$1.0 million, net to its interest, after payment of applicable royalties.

F-22

(13) COMMITMENTS AND CONTINGENCIES - (CONTINUED)

CEMENT I UNIT - CADDO COUNTY, OKLAHOMA. In 1991, an administrative
hearing was held by the Oklahoma Corporation Commission ("OCC") to establish the
cause of the saltwater contamination of the municipal water supply of the city
of Cyril, Oklahoma and to formulate a plan of abatement of the pollution.
Parties to the hearing included the current and former operators of the Cement,
Cement I and West Cement units. The Company owns a 18.56% interest and controls
an additional 6.42% interest through investment programs in the Cement I Unit.
In August 1992, the administrative law judge granted the Company's motion to
dismiss on the grounds that the Company had not violated any statute, rule or
regulation of the OCC and that the evidence did not establish that the Company
caused any contamination of the aquifer. The ruling was subsequently affirmed by
the OCC in December 1992. In January 1993, the current and former operators
filed Petitions in Error in the Supreme Court of Oklahoma to appeal the OCC's
decision. Matters raised on appeal include the dismissal of the Company. The OCC
is requiring the responsible parties to conduct an investigation and formulate a
plan of remediation during the pendency of the appeal.

It is not presently possible for the Company to determine the extent,
if any, to which it may incur liability for alleged saltwater contamination.
Under the terms of the Company's Purchase and Sale Agreement covering the Cement
I Unit, the predecessor in interest indemnified the Company from and against all
loss, damage, cost and expense relating to ownership for operations of the
purchased properties prior to October 1986.

MIDWAY FIELD - LAFAYETTE COUNTY, ARKANSAS. In 1992, the Company and
certain subsidiaries and affiliates became defendants in a personal injury
lawsuit in the 189th Judicial District court in Harris County, Texas as a result
of a rear-end collision on a county road near the Midway Field between vehicles
operated by a well-service company traveling to perform work for the Company at
the field. The plaintiff is severely injured and alleged that the accident was
the result of directions given by the Company. The plaintiff and his family
sought actual damages of $48 million and four times that amount in punitive
damages, which is in excess of the Company's insurance coverage. In December
1994, this lawsuit was settled within insurance limits.

BOWDOIN FIELD, PHILLIPS AND VALLEY COUNTIES, MONTANA. In February 1995,
two Company affiliates were served with a lawsuit filed by KN Gas Supply
Services, Inc. ("KNGSS") in Federal District Court in Denver, Colorado,
requesting declaratory judgement that KNGSS had the right to reduce the contract
price for gas produced from the Bowdoin Field to market levels from October 1,
1993 forward pursuant to certain pricing provisions in the contract. KNGSS also
requested declaratory judgement that it has a right to relief from the contract
price due to regulatory changes, which it alleges renders the contract
commercially impracticable, and that Federal Energy Regulatory Commission Order
No. 636 is a condition subsequent which excuses performance under the contract.
The Company will vigorously defend its interests in this case and firmly
believes that the Bowdoin Field contract price will be upheld by the Court.

LIMITED PARTNERSHIP LITIGATION. In February 1995, the Company and
American Exploration Production Company, a subsidiary of the Company, were
served with a lawsuit instituted on October 14, 1994 styled RICHARD RILEY AND
FRANCES RILEY V. LEROY WOLF, NEW YORK LIFE INSURANCE COMPANY, NYLIFE EQUITY,
INC., NYLIFE REALTY INCOME PARTNERS I, L.P., NEW YORK LIFE OIL AND GAS PRODUCING
PROPERTIES II-E, L.P., LINCLAY INVESTMENT PROPERTIES, INC., AMERICAN EXPLORATION
PRODUCTION COMPANY, JOHN DOES (1-10) AND A.B.C. CORP. (1-10) Civil Action No.
94.5827 (HAA) presently pending in the United States District Court, District of
New Jersey. The plaintiffs allege various causes of action, including
inefficient and wasteful management of partnership assets, relating to their
investment in real estate and oil and gas limited partnerships. American
Exploration Production Company acts as a co-general partner in the oil and gas
limited partnership. The plaintiffs seek a recision of their investments,
compensatory and punitive damages, and other relief. The Company believes it and
its affiliate have conducted themselves properly with respect to such limited
partnership and will vigorously defend this lawsuit.

F-23

(13) COMMITMENTS AND CONTINGENCIES - (CONTINUED)

NORM RELATED PROCEEDINGS

The Company and certain subsidiaries, among other operators, have been
named as defendants in three lawsuits in Mississippi and three lawsuits in
Louisiana alleging various causes of action due to the alleged presence of
naturally occurring radioactive materials ("NORM") and other hazardous
substances. The plaintiffs allege that the NORM contamination is a result of oil
and gas operations conducted on properties operated or owned by the Company, its
subsidiaries and their predecessors in title, or NORM contaminated pipe
delivered to a pipe cleaning facility by the Company and subsidiaries.

The Company has conducted a review of its operations with particular
attention to environmental compliance. The Company believes it has acted as a
prudent operator and is in compliance in all material respects with
environmental regulations. As part of the Company's continuing operations, the
Company has recorded site remediation costs of $2.4 million in 1994 and
anticipates it will incur additional costs from time to time related to the
continued assessment, testing, disposal, site restoration and other activities
in connection with the Company's environmental proceedings. The Company will
continue to vigorously contest liability under the pending proceedings and seek
to apportion any resulting liability under such proceedings among the Company,
its predecessor operators and other working interest owners. Because of the
early stages of these proceedings, it is not possible to quantify what
liabilities, if any, the Company might incur.

A brief summary of each of the lawsuits is listed below.

BAY SPRINGS FIELD - JASPER COUNTY, MISSISSIPPI. In May 1994, the
Company was served with a lawsuit (the "Complaint") filed by private landowners
against the Company, and other defendants in the Circuit Court of Jasper County,
Mississippi, First Judicial District based on the presence of NORM on the
plaintiffs' property. The plaintiffs allege that the NORM contamination is a
result of oil and gas operations conducted on properties operated by the Company
and its predecessors in title and on properties in which the Company does not
own an interest. The Complaint seeks compensatory damages of $50 million and
punitive damages of $75 million. It is not known at this time the amount of
damages sought against the Company since the plaintiffs do not specify damages
by individual property.

The Company removed the lawsuit to federal court and obtained a ruling
from the Court that allowed remediation of the property operated by the Company.
The lawsuit has been remanded back to the Circuit Court of Jasper County. The
Company has completed a NORM remediation program on the property and the site
has been restored. It is the Company's belief that the completion of the
remediation effort has significantly reduced the basis for the plaintiffs'
damage claims.

DIAMOND FIELD - WAYNE COUNTY, MISSISSIPPI. The Company and a subsidiary
were served in May 1994 with a lawsuit in the Circuit Court of Wayne County,
Mississippi based on the presence of NORM and other hazardous materials arising
from oil and gas activities on certain tracts in the Diamond Field. Injunctive
relief and monetary and punitive damages are sought; however, the plaintiffs do
not specify the amount of damages being sought. In November 1994, the Court
denied a motion by the plaintiffs to enjoin the Company from remediating the
property without approval by the plaintiffs and issued a ruling that allowed the
Company to remediate the property without interference. The Company completed
remediation in February 1995. It is the Company's belief that the completion of
the remediation effort has significantly reduced the basis for the plaintiffs'
damage claims.

BOYCE FIELD - WAYNE COUNTY, MISSISSIPPI. A Company subsidiary, among
other defendants, was sued in March 1994 by a landowner in the Boyce Field,
Wayne County, Mississippi, in the Circuit Court of Jasper County, Mississippi,
First Judicial District, alleging substantially similar causes of action as in
the Bay Springs Complaint for $3 million in compensatory damages and $6 million
in punitive damages. A NORM remediation program was also undertaken at this
property and the site has been completely restored. On October 5, 1994 the
lawsuit was dismissed upon motion by the plaintiff. No new complaint has been
filed.
F-24

(13) COMMITMENTS AND CONTINGENCIES - (CONTINUED)

FORDOCHE FIELD, POINT COUPEE PARISH, LOUISIANA. In August 1994, a
Company subsidiary and affiliate were served with a lawsuit in the 18th Judicial
District Court, Point Coupee Parish, Louisiana. The plaintiffs allege they
represent a class of plaintiffs damaged by oil and gas activities, including
damages caused by NORM, elevated levels of chlorides and other hazardous oil
field wastes and substances, in the Fordoche Field and other fields operated by
a third party near Lottie, Louisiana. The class certification has not been
approved by the Court. The plaintiffs seek unspecified compensation for actual
and exemplary damages. The Company owns a minority interest and does not operate
this property. The plaintiffs have granted the Company an indefinite extension
of time to answer the lawsuit. The Company intends to vigorously defend itself
in this matter.

51 OIL CORP. FACILITY. A Company subsidiary has been served with two
lawsuits relating to the 51 Oil Corp. Facility near Lafayette, Louisiana. In 51
OIL CORP. V. ADOBE RESOURCES CORP. ET AL., Civil Action No. 93-08548, filed in
Civil District Court in Orleans Parish, Louisiana, the plaintiff alleges that
the Company's subsidiary, among 65 other defendants, supplied pipe contaminated
with NORM to the plaintiff. The plaintiff alleges that the defendants failed to
warn plaintiff of this condition, among other allegations, and seeks
contribution by the defendants for the cost of remediation of its property as
well as other damages. The plaintiff's records indicate that the Company
subsidiary supplied about one-half of one percent of the pipe to the facility.
An agreement to settle the lawsuit for $25,000 has been executed and the lawsuit
will be dismissed with prejudice as to the Company's subsidiary.

In DANNY BROUSSARD ET AL. V. ADOBE RESOURCES CORP. ET AL., Civil Action
No. 94-8019, filed in July 1994 in Civil District Court in Orleans Parish,
Louisiana, the plaintiffs, an employee of 51 Oil Corp. and his family, allege
that a Company subsidiary delivered pipe contaminated with NORM to 51 Oil Corp.,
as stated in the preceding case, and such actions caused plaintiff to suffer
various personal injuries. The plaintiffs seek compensatory and punitive damages
for both medical expenses and other damages; however, the plaintiffs do not
specify the amount of damages being sought.

The Company does not expect the resolution of the matters discussed
above to have a material adverse effect on its financial position or results of
operations.
F-25

(14) CASH FLOW INFORMATION

Supplemental cash flow information is presented below (in thousands):

YEAR ENDED DECEMBER 31,
---------------------------
1994 1993 1992
------- ------ ------
CASH PAYMENTS:
Interest, net of amounts capitalized (a) ....... $ 6,528 $6,931 $10,470
Income taxes ................................... 39 567 715

NONCASH INVESTING AND FINANCING ACTIVITIES:
APPL Consolidation:
Acquisition of oil and gas properties .......... $ 52,222 $ -- $ --
Other assets acquired .......................... 2,287 -- --
Liabilities assumed ............................ 535 -- --
Debt retired ................................... 1,612 -- --
American common stock issued ................... (56,230) -- --
Gain on extinguishment of debt ................. (426) -- --

Issuance of common stock to officers ........... $ -- $1,237(b) $ --

Restructuring of APPL Debt promissory note:
Net profits interest conveyed .................. $ -- $ -- $ 2,278
Reduction in loan balance ...................... -- -- 5,657

(a) The Company capitalized approximately $1.5 million, $2.3 million and
$3.3 million of interest in 1994, 1993 and 1992, respectively, based on
the Company's weighted average bank borrowing rate for the period.

(b) Amount consists of notes receivable from officers totaling
approximately $230,000 and unearned compensation of approximately $1.0
million, which are both included as reductions in stockholders' equity.

F-26

(15) INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS

The Company's only industry segment is oil and gas exploration and
production. Information regarding the Company's operations by geographic area
for the last three years is presented below (in thousands):

UNITED OTHER
STATES(a) CANADA(b) FOREIGN CONSOLIDATED
--------- --------- -------- ------------
YEAR ENDED DECEMBER 31, 1994
Sales to unaffiliated customers ... $ 50,033 $ -- $ -- $ 50,033
Loss from operations .............. (44,727) -- (6,706) (51,433)
Identifiable assets ............... 223,894 -- -- 223,894

YEAR ENDED DECEMBER 31, 1993
Sales to unaffiliated customers ... $ 44,334 $ 5,255 $ -- $ 49,589
Income (loss) from operations ..... 844 822 (13,684) (12,018)
Identifiable assets ............... 178,642 -- 6,956 185,598

YEAR ENDED DECEMBER 31, 1992
Sales to unaffiliated customers ... $ 49,505 $ 9,055 $ -- $ 58,560
Loss from operations .............. (21,812) (36,558) (1,309) (59,679)
Identifiable assets ............... 195,180 47,015 14,625 256,820

(a) In 1994, the Company reported an impairment charge of approximately
$25.0 million related to the change in accounting policy for impairment
of proved oil and gas properties.

(b) In 1992, the Company reported an impairment charge of $35.1 million
related to the proposed sale of its Canadian foothill properties. In
mid-1993, the Company sold all of its Canadian assets.

(16) QUARTERLY RESULTS - (UNAUDITED)

(In thousands, except for per share data)

FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
YEAR ENDED DECEMBER 31, 1994 (a)
Oil and gas sales .................. $ 9,366 $ 11,145 $ 13,355 $ 16,167
Total revenues ..................... 9,433 11,442 13,831 16,653
Loss from operations ............... (11,329) (2,413) (4,035) (33,656)
Loss before extraordinary item ..... (12,809) (4,273) (5,608) (37,545)
Net loss ........................... (12,809) (2,231) (2,657) (37,119)

Net loss per common share:
Loss before extraordinary item... $ (.19) $ (.07) $ (.08) $ (.37)
Extraordinary gain on
extinguishment of debt........... -- .03 .04 .01
-------- --------- --------- --------
Net loss per common share....... $ (.19) $ (.04) $ (.04) $ (.36)
======== ========= ========= ========
YEAR ENDED DECEMBER 31, 1993 (b)
Oil and gas sales.................. $14,025 $ 14,096 $ 11,352 $ 10,116
Total revenues..................... 14,014 17,113 17,416 9,615
Income (loss) from operations...... (1,217) 3,138 (1,448) (12,491)
Net income (loss).................. (3,120) 933 (3,183) (13,816)

Net income (loss) per common share $ (.04) $ .01 $ (.05) $ (.20)

(a) In the first quarter of 1994, the Company recorded impairment expense
of $6.4 million for the write-off of American's remaining leasehold
interest in Tunisia. During the fourth quarter, the Company reported an
impairment charge of approximately $25.0 million related to the change
in accounting policy for impairment of proved oil and gas properties.
Also in the fourth quarter, the Company recorded additional impairment
expense of $1.4 million associated with several properties on which no
further exploratory work is planned and a $2.0 million severance charge
as a result of the APPL Consolidation. In the second, third and fourth
quarters of 1994, the Company recorded extraordinary gains of $2.0
million, $3.0 million and $426,000, respectively, which resulted from
the elimination of nonrecourse debt through the APPL consolidation.

(b) In the second quarter of 1993, the Company recorded $9.7 million of gas
settlement income resulting from the litigation settlement with LIG and
recognized a loss of $5.8 million related to the sales of the Company's
Canadian assets. The Company recognized $6.2 million of gas settlement
income in the third quarter related to the Thomasville settlement. In
the third quarter and fourth quarter, American recorded impairment
expense of $4.0 million and $6.2 million, respectively, for the
write-off of leasehold interests associated with the Company's
international properties.

Quarterly earnings per common share are based on the weighted average
number of shares outstanding during the quarter, and the sum of the quarters may
not equal annual earnings per common share.

F-28

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
AMERICAN EXPLORATION COMPANY AND SUBSIDIARIES

CAPITALIZED COSTS
(In thousands)
UNITED OTHER
STATES FOREIGN TOTAL
-------- ------- --------
AS OF DECEMBER 31, 1994
Proved properties ......................... $294,048 $ -- $294,048
Unproved oil and gas interests ............ 24,405 -- 24,405
-------- ------ --------
Total capitalized costs ................... 318,453 -- 318,453
Less: Accumulated depreciation,
depletion and amortization .............. 128,509 -- 128,509
-------- ------ --------
Net capitalized costs ..................... $189,944 $ -- $189,944
======== ====== ========

AS OF DECEMBER 31, 1993
Proved properties ......................... $226,261 $ -- $226,261
Unproved oil and gas interests ............ 24,778 6,914 31,692
-------- ------ --------
Total capitalized costs ................... 251,039 6,914 257,953
Less: Accumulated depreciation,
depletion and amortization .............. 103,555 -- 103,555
-------- ------ --------
Net capitalized costs ..................... $147,484 $6,914 $154,398
======== ====== ========

COSTS INCURRED IN OIL AND GAS ACQUISITION,
EXPLORATION AND DEVELOPMENT ACTIVITIES

(In thousands)

UNITED OTHER
STATES CANADA FOREIGN TOTAL
-------- ------ ------ --------

YEAR ENDED DECEMBER 31, 1994
Property acquisition costs:
Proved .............................................................. $ 81,385 $ -- $ -- $ 81,385
Unproved<F1> ........................................................ 1,496 -- -- 1,496
Exploration costs ..................................................... 2,583 -- -- 2,583
Development costs ..................................................... 15,804 -- -- 15,804
-------- ------ ------ --------
Total costs incurred ................................................ $101,268 $ -- $ -- $101,268
======== ====== ====== ========

YEAR ENDED DECEMBER 31, 1993
Property acquisition costs:
Proved .............................................................. $ 4,596 $1,011 $ -- $ 5,607
Unproved (a) ........................................................ 1,390 -- 956 2,346
Exploration costs ..................................................... 6,103 79 4,927 11,109
Development costs ..................................................... 8,786 686 -- 9,472
-------- ------ ------ --------
Total costs incurred ................................................ $ 20,875 $1,776 $5,883 $ 28,534
======== ====== ====== ========

YEAR ENDED DECEMBER 31, 1992
Property acquisition costs:
Proved .............................................................. $ 38 $ 230 $ -- $ 268
Unproved (a) ........................................................ 2,274 -- 1,026 3,300
Exploration costs ..................................................... 8,511 277 1,400 10,188
Development costs ..................................................... 6,604 1,767 -- 8,371
-------- ------ ------ --------
Total costs incurred ................................................ $ 17,427 $2,274 $2,426 $ 22,127
======== ====== ====== ========
<FN>
<F1> Amounts represent capitalized interest.

F-29

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES - (CONTINUED)

RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES

(In thousands)

UNITED OTHER
STATES CANADA FOREIGN TOTAL
-------- -------- -------- --------

YEAR ENDED DECEMBER 31, 1994
Revenues ....................................................... $ 50,033 $ -- $ -- $ 50,033
Production and operating costs ................................. 21,302 -- -- 21,302
Exploration expense ............................................ 2,569 -- (10) 2,559
Depreciation, depletion and amortization ....................... 28,062 -- -- 28,062
Impairment expense ............................................. 27,127 -- 6,443 33,570
Taxes other than income ........................................ 4,630 -- -- 4,630
Income tax benefit ............................................. (455) -- -- (455)
-------- -------- -------- --------
Results of operations for producing activities ................. $(33,202) $ -- $ (6,433) $(39,635)
======== ======== ======== ========
YEAR ENDED DECEMBER 31, 1993
Revenues ....................................................... $ 44,334 $ 5,255 $ -- $ 49,589
Production and operating costs ................................. 14,088 1,910 -- 15,998
Exploration expense ............................................ 4,219 80 3,255 7,554
Depreciation, depletion and amortization ....................... 20,192 1,861 -- 22,053
Impairment expense ............................................. 773 -- 10,202 10,975
Taxes other than income ........................................ 3,687 42 -- 3,729
Income tax expense ............................................. 505 -- -- 505
-------- -------- -------- --------
Results of operations for producing activities ................. $ 870 $ 1,362 $(13,457) $(11,225)
======== ======== ======== ========
YEAR ENDED DECEMBER 31, 1992
Revenues ....................................................... $ 49,505 $ 9,055 $ -- $ 58,560
Production and operating costs ................................. 15,567 3,845 -- 19,412
Exploration expense ............................................ 6,666 277 900 7,843
Depreciation, depletion and amortization ....................... 23,482 5,041 -- 28,523
Impairment expense ............................................. 10,491 35,095 -- 45,586
Taxes other than income ........................................ 4,149 242 -- 4,391
Income tax expense ............................................. 108 -- -- 108
-------- -------- -------- --------
Results of operations for producing activities ................. $(10,958) $(35,445) $ (900) $(47,303)
======== ======== ======== ========

F-30

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES - (CONTINUED)

OIL AND GAS RESERVE INFORMATION - (UNAUDITED)

The following summarizes the policies used by the Company in preparing
the accompanying oil and gas reserve disclosures, standardized measure of
discounted future net cash flows relating to proved oil and gas reserves and the
reconciliation of such standardized measure from period to period.

Proved reserves are estimated quantities of crude oil and natural gas
which geological and engineering data demonstrate with reasonable certainty to
be recoverable in future years from known reservoirs under existing economic and
operating conditions. Proved developed reserves are proved reserves that can
reasonably be expected to be recovered through existing wells with existing
equipment and operating methods.

The standardized measure of discounted future net cash flows from
production of proved reserves was developed by first estimating the quantities
of proved reserves and the future periods during which they are expected to be
produced based on year-end economic conditions. The estimated future cash flows
from proved reserves were then determined based on year-end prices, except in
those instances where fixed and determinable price escalations are included in
existing contracts. Finally, future cash flows were reduced by estimated
production costs, costs to develop and produce the proved reserves, and certain
abandonment costs, all based on year-end economic conditions and the estimated
effect of future income taxes based on the current tax law.

The standardized measure of discounted future net cash flows does not
purport, nor should it be interpreted, to present the fair value of the
Company's oil and gas reserves. An estimate of fair value would also take into
account, among other things, the recovery of reserves not presently classified
as proved, anticipated future changes in prices and costs and a discount factor
more representative of the time value of money and the risks inherent in reserve
estimates.

The information presented on the following pages reflects the sales of
the Company's Canadian properties in mid-1993.

F-31

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES - (CONTINUED)

STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
RELATING TO PROVED OIL AND GAS RESERVES - (UNAUDITED)

(In thousands)
UNITED
STATES CANADA TOTAL
--------- --------- ---------
YEAR ENDED DECEMBER 31, 1994
Future cash inflows ........................ $ 502,989 $ -- $ 502,989
Future production and development costs .... (258,711) -- (258,711)
--------- --------- ---------
Future net cash flows before income taxes .. 244,278 -- 244,278
Future income taxes ........................ (2,109) -- (2,109)
--------- --------- ---------
Future net cash flows after income taxes ... 242,169 -- 242,169
Discount at 10% annual rate ................ (101,463) -- (101,463)
--------- --------- ---------
Standardized measure of discounted future
net cash flows ........................... $ 140,706 $ -- $ 140,706
========= ========= =========
YEAR ENDED DECEMBER 31, 1993
Future cash inflows ........................ $ 326,768 $ -- $ 326,768
Future production and development costs .... (147,481) -- (147,481)
--------- --------- ---------
Future net cash flows before income taxes .. 179,287 -- 179,287
Future income taxes ........................ (4,528) -- (4,528)
--------- --------- ---------
Future net cash flows after income taxes ... 174,759 -- 174,759
Discount at 10% annual rate ................ (71,489) -- (71,489)
--------- --------- ---------
Standardized measure of discounted future
net cash flows ........................... $ 103,270 $ -- $ 103,270
========= ========= =========
YEAR ENDED DECEMBER 31, 1992
Future cash inflows ........................ $ 456,349 $ 181,326 $ 637,675
Future production and development costs .... (187,031) (88,659) (275,690)
--------- --------- ---------
Future net cash flows before income taxes .. 269,318 92,667 361,985
Future income taxes ........................ (3,201) (18,926) (22,127)
--------- --------- ---------
Future net cash flows after income taxes ... 266,117 73,741 339,858
Discount at 10% annual rate ................ (126,374) (32,672) (159,046)
--------- --------- ---------
Standardized measure of discounted future
net cash flows ........................... $ 139,743 $ 41,069 $ 180,812
========= ========= =========
F-32

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES - (CONTINUED)

CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS -
(UNAUDITED)

(In thousands)

1994 1993 1992
--------- --------- ---------

Balance, beginning of year ...................................................... $ 103,270 $ 180,812 $ 193,419
Sales and transfers of oil and gas produced, net of production costs ............ (24,101) (31,818) (36,817)
Net changes in prices and production costs ...................................... (67,753) (19,870) 7,696
Extensions, discoveries and improved recoveries, net of future
production and development costs .............................................. 3,822 12,780 5,218
Purchases of minerals in place .................................................. 115,379 7,203 1,116
Sales of minerals in place ...................................................... (451) (48,521) (3,801)
Changes in estimated future development costs ................................... 4,997 (5,325) (4,247)
Development costs incurred during the year ...................................... 11,518 7,931 6,520
Revisions of previous quantity estimates ........................................ (7,826) (15,967) 10,510
Accretion of discount ........................................................... 10,476 18,269 19,958
Net change in future income taxes ............................................... 117 386 (1,129)
Changes in production rates (timing) and other .................................. (8,742) (2,610) (17,631)
--------- --------- ---------
Balance, end of year ............................................................ $ 140,706 $ 103,270 $ 180,812
========= ========= =========

F-33

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES - (CONTINUED)

RESERVE QUANTITY INFORMATION - (UNAUDITED)

UNITED STATES CANADA TOTAL
---------------------- --------------------- ----------------------
OIL GAS OIL GAS OIL GAS
(MBbls) (MMcf) (MBbls) (MMcf) (MBbls) (MMcf)
------- -------- ------ -------- ------- --------

PROVED RESERVES
Balance at December 31, 1991 ................. 10,070 130,145 1,326 117,145 11,396 247,290
Purchases of minerals in place ............. -- -- 112 758 112 758
Extensions, discoveries and other
additions ................................. 248 2,038 28 190 276 2,228
Revisions of previous estimates ............ (286) 7,606 169 10,329 (117) 17,935
Sales of minerals in place ................. (694) (3,137) (62) (1,183) (756) (4,320)
Production ................................. (1,307) (13,279) (181) (6,526) (1,488) (19,805)
------- -------- ------ -------- ------- --------
Balance at December 31, 1992 ................. 8,031 123,373 1,392 120,713 9,423 244,086
Purchases of minerals in place ............. 107 10,029 51 7,182 158 17,211
Extensions, discoveries and other
additions ................................. 326 10,157 -- 544 326 10,701
Revisions of previous estimates ............ (1,127) (13,642) -- -- (1,127) (13,642)
Sales of minerals in place ................. (253) (13,400) (1,371) (124,897) (1,624) (138,297)
Production ................................. (1,189) (11,794) (72) (3,542) (1,261) (15,336)
------- -------- ------ -------- ------- --------
Balance at December 31, 1993 ................. 5,895 104,723 -- -- 5,895 104,723
Purchases of minerals in place ............. 5,153 108,075 -- -- 5,153 108,075
Extensions, discoveries and other
additions ................................. 128 12,825 -- -- 128 12,825
Revisions of previous estimates ............ (197) (22,467) -- -- (197) (22,467)
Sales of minerals in place ................. (78) (235) -- -- (78) (235)
Production ................................. (1,241) (16,241) -- -- (1,241) (16,241)
------- -------- ------ -------- ------- --------
Balance at December 31, 1994 ................. 9,660 186,680 -- -- 9,660 186,680
======= ======== ====== ======== ======= ========
PROVED DEVELOPED RESERVES
Balance at December 31, 1992 ................. 6,670 88,157 1,361 101,178 8,031 189,335
======= ======== ====== ======== ======= ========
Balance at December 31, 1993 ................. 5,018 71,623 -- -- 5,018 71,623
======= ======== ====== ======== ======= ========
Balance at December 31, 1994 ................. 8,697 127,838 -- -- 8,697 127,838
======= ======== ====== ======== ======= ========

F-34

EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

American Exploration Company Stock Compensation Plan, effective December 9, 1988
(Form S-8, September 21, 1989, Registration No. 31-31202, Exhibit 4(c)).

American Exploration Company Amended and Restated 1978 Hershey Oil Corporation
Non-Qualified Equity Participation Plan (Form S-4, August 8, 1990, Registration
No. 33-36268, Exhibit 10(ccc)).

American Exploration Company Amended and Restated 1983 Stock Option Plan of
Hershey Oil Corporation (Form S-4, August 8, 1990, Registration No. 33-36268,
Exhibit 10(ddd)).

American Exploration Company Amended and Restated 1988 Stock Option Plan of
Hershey Oil Corporation (Form S-4, August 8, 1990, Registration No. 33-36268,
Exhibit 10(eee)).

American Exploration Company Exploration Group Investment Plan (Form 10-K,
December 31, 1991, Exhibit 10(sss)).

Employee Stock Ownership Trust of American Exploration Company, as Amended and
Restated Effective January 1, 1991 (Form 10-Q, June 30, 1992, Exhibit 10(b)).

Employee Stock Ownership Plan of American Exploration Company, as Amended and
Restated Effective January 1, 1991 (Form 10-Q, June 30, 1992, Exhibit 10(c)).

Revised Employment Agreements, dated September 1, 1994, with the executive
officers of American Exploration Company (Form 10-Q, September 30, 1994, Exhibit
10(a)).

Phantom Stock Plan of American Exploration Company, effective September 21, 1993
(Form 10-Q, September 30, 1993, Exhibit 10(b)).

X-1

INDEX OF EXHIBITS

*3(a) - Restated Certificate of Incorporation of American Exploration
Company (Form S-3, July 13, 1994, Registration No. 33-54561, Exhibit
4.1), as supplemented by Certificate of Amendment to Restated
Certificate of Incorporation of American Exploration Company (Form
S-3, July 13, 1994, Registration No. 33-54561, Exhibit 4.2).

*3(b) - Amended and Restated Bylaws of American Exploration Company (Form
8-A, March 23, 1994, Exhibit 2).

*4(a) - Rights Agreement, dated as of September 28, 1993, between American
Exploration Company and Society National Bank (Form 8-K, September
28, 1993, Exhibit 4), as supplemented by Amendment to Rights
Agreement, dated as of August 3, 1994, between American Exploration
Company and Society National Bank (Form 8-K, August 31, 1994,
Exhibit 4).

*4(b) - Certificate of Designation of the $450 Cumulative Convertible
Preferred Stock, Series C, dated December 14, 1993 (Form S-3,
January 4, 1994, Registration No. 33-51795, Exhibit 4.3), as
supplemented by Certificate of Correction to the Certificate of
Designation of the $450 Cumulative Convertible Preferred Stock,
Series C, dated December 29, 1993 (Form S-3, January 4, 1994,
Registration No. 33-51795, Exhibit 4.4).

*4(c) - Deposit Agreement, dated as of December 10, 1993, by and among
American Exploration Company, Harris Trust and Savings Bank and the
holders from time to time of Depositary Receipts (Form S-3, January
4, 1994, Registration No. 33-51795, Exhibit 4.5).

*4(d) - Purchase Agreement, dated as of December 10, 1993, by and among
American Exploration Company and each of the purchasers referred to
therein (Form S-3, January 4, 1994, Registration No. 33-51795,
Exhibit 4.6).

*4(e) - Registration Rights Agreement, dated as of December 17, 1993, by
and among American Exploration Company and each of the purchasers
referred to therein (Form S-3, January 4, 1994, Registration No.
33-51795, Exhibit 4.7).

*4(f) - Form of Stock Certificate representing shares of Convertible
Preferred Stock (Form 8-A, March 23, 1994, Exhibit 8).

*4(g) - Form of Depositary Receipt representing Depositary Shares (Form
8-A, March 23, 1994, Exhibit 9).

*10(a) - Agreement, dated August 11, 1983, by and between American
Exploration Company, Phillip Frost and the other parties signatory
thereto, to which is attached the related Form of Agreement of
Limited Partnership of South States Development, Ltd. (Form S-14,
October 18, 1983, Registration No. 2-87234, Exhibit 10(a)).

*10(b) - Agreement of Limited Partnership of American Production
Partnership - VII, Ltd., dated May 30, 1989, and related Agreements
by and between American Exploration Company and the Limited Partners
listed therein (Form S-2, October 19, 1989, Registration No. 33-
31646, Exhibit 10(e)).

*10(c) - Conveyance of Net Profits Overriding Royalty Interest, effective
June 1, 1989, from American Exploration Company to Sixty Corp. and
related Purchase and Sale Agreement (Form S-2, October 19, 1989,
Registration No. 33-31646, Exhibit 10(m)).

X-2

INDEX OF EXHIBITS - (CONTINUED)

*10(d) - Conveyance of Net Profits Overriding Royalty Interest, effective
June 1, 1989, from American Exploration Company to GEAPPL Corp. and
related Purchase and Sale Agreement (Form S-2, October 19, 1989,
Registration No. 33-31646, Exhibit 10(o)).

*10(e) - Forms of New York Life Oil & Gas Production Partnership Agreements
(Amendment No. 4 to Form S-2, January 21, 1988, Registration No.
33-18512, Exhibit 10(gg)).

*10(f) - Agreement of Limited Partnership, dated October 19, 1988, of
American Production Partnership - VI, Ltd., by and between American
Exploration Company and the Limited Partners listed therein (Form
10-K, December 31, 1988, Exhibit 10(x)).

*10(g) - Purchase Agreement, dated March 27, 1987, by and between Ameriplor
Corp. and the Purchasers named in Annex I thereto and related
financing documents (Form 10-K, December 31, 1986, Exhibit 4(m)).

*10(h) - Purchase Agreement, dated October 23, 1987, by and between Ninian
Oil Finance Corp. and the Purchasers named in Annex I thereto and
related financing documents (Amendment No. 2 to Form S-2, December
2, 1987, Registration No. 33-18512, Exhibit 4(q)).

*10(i) - Purchase Agreement, dated October 20, 1988, by and between
American Exploration Acquisition - VI Corp. and the Purchasers named
in Annex I thereto and related financing documents (Form 10-K,
December 31, 1988, Exhibit 4(f)).

*10(j) - Second Amended and Restated Agreement of Limited Partnership of
Amex Production Partnership, Ltd., effective November 30, 1988 (Form
S-2, October 19, 1989, Registration No. 33-31646, Exhibit 10(eee)).

*10(k) - Second Amended and Restated Agreement of Limited Partnership of
American Production Partnership - III, Ltd., effective November 30,
1988 (Form S-2, October 19, 1989, Registration No. 33-31646, Exhibit
10(ggg)).

*10(l) - Amended and Restated Agreement of Limited Partnership of American
Production Partnership - IV, Ltd., effective November 30, 1988 (Form
S-2, October 19, 1989, Registration No. 33-31646, Exhibit 10(hhh)).

*10(m) - Amended and Restated Agreement of Limited Partnership of American
Production Partnership - V, Ltd., effective November 30, 1988 (Form
S-2, October 19, 1989, Registration No. 33-31646, Exhibit 10(iii)).

*10(n) - American Exploration Company Stock Compensation Plan, effective
December 9, 1988 (Form S-8, September 21, 1989, Registration No.
31-31202, Exhibit 4(c)).

*10(o) - Agreement of Limited Partnership of American Production
Partnership-VIII, Ltd., dated May 1, 1990, and related Agreements by
and between American Exploration Company and the Limited Partners
therein (Form 10-Q, March 31, 1990, Exhibit 10(d)).

*10(p) - Conveyance of Net Profits Overriding Royalty Interest, effective
May 1, 1990, from American Exploration Company to GEAPPL Corp. (Form
10-Q, March 31, 1990, Exhibit 10(e)).

X-3

INDEX OF EXHIBITS - (CONTINUED)

*10(q) - Conveyance of Net Profits Overriding Royalty Interest, effective
May 1, 1990, from American Exploration Company to UNUM Life
Insurance Company (Form 10-Q, March 31, 1990, Exhibit 10(f)).

*10(r) - Conveyance of Net Profits Overriding Royalty Interest, effective
August 22, 1990, from American Exploration Company to The Chase
Manhattan Bank, N.A., as Directed Trustee for the IBM Retirement
Plan Trust (Form 10-Q, September 30, 1990, Exhibit 10(b)).

*10(s) - American Exploration Company Amended and Restated 1978 Hershey Oil
Corporation Non-Qualified Equity Participation Plan (Form S-4,
August 8, 1990, Registration No. 33- 36268, Exhibit 10(ccc)).

*10(t) - American Exploration Company Amended and Restated 1983 Stock
Option Plan of Hershey Oil Corporation (Form S-4, August 8, 1990,
Registration No. 33-36268, Exhibit 10(ddd)).

*10(u) - American Exploration Company Amended and Restated 1988 Stock
Option Plan of Hershey Oil Corporation (Form S-4, August 8, 1990,
Registration No. 33-36268, Exhibit 10(eee)).

*10(v) - Office Lease, dated December 12, 1990, between JMB/Houston Center
Partners Limited Partnership and American Exploration Company (Form
S-4, January 9, 1991, Registration No. 33-38546, Exhibit 10(kkk)).

*10(w) - Master Forward Agreement, dated as of December 18, 1990, between
The Chase Manhattan Bank, N.A. and American Exploration Company and
related Amendment (Form S-4, January 9, 1991, Registration No.
33-38546, Exhibit 10(lll)).

*10(x) - Stock Purchase Agreement by and among American Exploration Company
and The Dyson-Kissner-Moran Corporation, dated October 21, 1990
(Form 8-K, October 25, 1990, Exhibit 28(a)).

*10(y) - Master Exchange Agreement, dated as of February 1, 1991, between
American Exploration Company and Morgan Guaranty Trust Company of
New York (Form 10-Q, March 31, 1991, Exhibit 10(a)).

*10(z) - Note Purchase Agreement, dated as of December 27, 1991, re:
$35,000,000 11% Senior Subordinated Notes due December 30, 2001
(Form 8-K, January 10, 1992, Exhibit 10(a)), as supplemented by the
Amendment to Note Purchase Agreement, dated as of February 16, 1993,
by and among American Exploration Company (the "Company") and the
parties named therein (Form 8-K, February 16, 1993, Exhibit 10(a)),
as supplemented by letter agreement, dated March 22, 1993, by and
among the Company and the parties named therein (Form 10-K, December
31, 1992, Exhibit 10(zz)), as supplemented by Second Amendment to
Note Purchase Agreement, dated as of September 30, 1993, by and
among the Company and the parties named therein (Form 10-Q,
September 30, 1993, Exhibit 10(c)), as supplemented by Third
Amendment to Note Purchase Agreement, dated as of March 18, 1994, by
and among the Company and the parties named therein (Form 10-K,
December 31, 1993, Exhibit 10(tt)), as supplemented by Fourth
Amendment to Note Purchase Agreement, dated as of April 28, 1994, by
and among the Company and the parties named therein (Form 10-Q,
March 31, 1994, Exhibit 10(c)), as supplemented by Fifth Amendment
to Note Purchase Agreement, dated as of July 26, 1994, by and among

X-4

INDEX OF EXHIBITS - (CONTINUED)

the Company and the parties named therein (Form 10-Q, September 30,
1994, Exhibit 10(c)).

*10(aa) - Warrant Purchase Agreement and Form of Warrants, dated as of
December 27, 1991 (Form 8-K, January 10, 1992, Exhibit 10(b)), as
supplemented by Amendment No. 1 to Warrant Purchase Agreement, dated
as of February 16, 1993, by and among American Exploration Company
and the parties named therein (Form 8-K, February 16, 1993, Exhibit
10(b)).

*10(bb) - American Exploration Company Exploration Group Investment Plan
(Form 10-K, December 31, 1991, Exhibit 10(sss)).

*10(cc) - Employee Stock Ownership Trust of American Exploration Company, as
Amended and Restated Effective January 1, 1991 (Form 10-Q, June 30,
1992, Exhibit 10 (b)).

*10(dd) - Employee Stock Ownership Plan of American Exploration Company, as
Amended and Restated Effective January 1, 1991 (Form 10-Q, June 30,
1992, Exhibit 10 (c)).

*10(ee) - Stock Purchase Agreement, dated as of September 3, 1992, between
American Exploration Company and The Prudential Insurance Company of
America (Form 8-K, September 3, 1992, Exhibit 10(a)).

*10(ff) - Stock Purchase Warrant, dated as of September 3, 1992, between
American Exploration Company and The Prudential Insurance Company of
America (Form 8-K, September 3, 1992, Exhibit 10(b)).

*10(gg) - Registration Rights Agreement, dated as of September 3, 1992,
between American Exploration Company and The Prudential Insurance
Company of America (Form 8-K, September 3, 1992, Exhibit 10(c)).

*10(hh) - Sale of Securities Offer dated June 4, 1993 (Form 8-K, June 14,
1993, Exhibit 10(a)).

*10(ii) - Purchase and Sale Agreement, dated as of March 31, 1993, by and
among Conquest Exploration Company and New York Life Oil & Gas
Operating Production Partnership III-F, New York Life Oil & Gas
Operating Production Partnership III-G and New York Life Oil & Gas
Operating Production Partnership III-H (Form 8-K, June 14, 1993,
Exhibit 10(b)).

*10(jj) - Stock Purchase Agreement, dated July 8, 1993, by and between
Equitable Resources Energy Company and American Exploration Company
(Form 8-K, July 7, 1993, Exhibit 10(a)).

*10(kk) - Purchase and Sale Agreement by and between Conquest Exploration
Company and Canadian Conquest Exploration, Inc. with respect to
Conquest Ventures Canada, Inc. (Form 8-K, July 7, 1993, Exhibit
10(b)).

*10(ll) - Phantom Stock Plan of American Exploration Company, effective
September 21, 1993 (Form 10-Q, September 30, 1993, Exhibit 10(b)).

X-5

INDEX OF EXHIBITS - (CONTINUED)

*10(mm) - Agreement of Limited Partnership of Ancon Partnership Ltd., dated
December 10, 1993, by and between American Exploration Company and
NYLIFE Resources, Inc. (Form 10-K, December 31, 1993, Exhibit
10(rr)).

*10(nn) - Letter Agreement, dated as of April 1, 1994, re: $40,000,000
Secured Credit Facility between American Exploration Company and New
York Life Insurance Company (Form 10-Q, March 31, 1994, Exhibit
10(b)).

*10(oo) - Revised Employment Agreements, dated September 1, 1994, with the
executive officers of American Exploration Company (Form 10-Q,
September 30, 1994, Exhibit 10(a)).

10(pp) - Amended and Restated Credit Agreement, dated as of December 21,
1994, among American Exploration Company, the banks listed herein
and Morgan Guaranty Trust Company of New York, as agent, and Bank of
Montreal, as co-agent.

10(qq) - Amendment No. 1 to Amended and Restated Credit Agreement, dated as
of February 16, 1995, among American Exploration Company, the banks
listed herein and Morgan Guaranty Trust Company of New York, as
agent, and Bank of Montreal, as co-agent.

12 - Statements Re Computations of Ratios

18 - Letter from Arthur Andersen LLP, dated March 30, 1995, re: Change
in American Exploration Company's Accounting Policy Related to
Recognizing Impairment of Proved Oil and Gas Properties.

21 - Subsidiaries of American Exploration Company

23 - Consent of Arthur Andersen LLP

27 - Financial Data Schedule
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* Incorporated herein by reference.

Note: Copies of Exhibits may be obtained for 30 cents per page, prepaid, by
writing to the Investor Relations Department.

X-6